Legal advice from John King, Commercial Partner at FDR Law
Q: What is meant by the term Zombie Company?
A: The phrase ‘Zombie Company’ has been used, usually by the media, to describe a business that requires financial support in order to continue operating, or is company that is in debt and is able to repay the interest, but not the debt itself.
The current historic low interest rates have been a major factor in keeping many of these businesses alive, though with the premise that the Bank of England could soon begin to normalise interest rates then we could see an increase in companies failing.
For business owners and directors finding themselves in this difficult situation we would advocate that they seek advice as soon as possible to give themselves the best chance of getting the business back on track or to minimise the risk of any personal liability arising from an insolvency situation.
An experienced Commercial solicitor is able to advise the directors of the business on their options based on their circumstances, which could include a restructuring programme, a business sale or corporate insolvency.
If insolvency is the route taken, then a solicitor would work in conjunction with the insolvency practitioners and equity stakeholders to secure an efficient and beneficial outcome, providing legal guidance and support for the winding up proceedings.