Another downside risk, and a pretty serious one, is that you might go bust. But this doesn’t need to be the end of things. Sometimes, whilst declaring you’re bust is the right thing to do, it might not be the end of the business.
There’s a seemingly innocent term called refinancing, which might also be called reorganisation, administration or even pre-pack. What these terms essentially mean is that the existing business is being closed (which means the existing shareholders lose the money they originally put in) and a new business is being set up. However, the brand isn’t being closed – it continues. The new company might have to buy the brand from the old company but it can be a neat way of keeping the brand alive.
You might be surprised to learn that Harley Davidson, amongst many others, went bust and was bought out by new investors, who thought they could build a new and profitable business. The brand, and its reputation survived, even though the business declared bankruptcy.
Think of your brand as an asset that’s owned by your business. Let’s make something up: your brand is Pizza Perfect and your company is The Italian Nosh Company Ltd. Can you see that if this company gets into trouble and is refinanced into another limited company, the brand can remain intact.
And as a director of the company, so long as you’ve fully observed your legal obligations, it’s perfectly legal to close one limited company and open another using the same brand.
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