Cinemas and theatres closure and rescue options
Cinemas and theatres play a crucial role in cultural and community life, but just like any other business in the leisure sector, can face financial challenges. A change in consumer preferences, along with high operational costs and a limited revenue stream can put pressure on many companies. Whether you’re exploring closure or seeking rescue options, understanding the insolvency processes available to you is crucial.
This guide is designed to help you navigate the complexities of insolvency, offering practical advice tailored to cinemas and theatres. With the right knowledge, we can help you make the most informed decisions about the future of your company, whether it involves restructuring, refinancing, or winding down operations.
Common financial problems for cinemas and theatres
We can help advise on specific financial issues your cinema or theatre may be facing, including but not limited to:
- Changing consumer preferences
Entertainment is typically one of the first cutbacks consumers make when facing financial uncertainty. The rise of on-demand streaming platforms has diverted audiences away from cinemas and theatres, further reducing ticket sales. If your business is facing financial difficulty due to reduced ticket sales, we can help you understand the insolvency solutions available. - High operational costs
Cinemas and theatres typically operate in high-visibility, high-rent locations, which come with high business rates. These facilities often require maintenance of expensive specialised equipment such as projectors, sound systems and stage lightings. Both cinemas and theatres also have the additional costs of film royalties and the rights to perform musicals and plays. By acting quickly, we can help you navigate these expensive costs and advise on the best solutions if these have caused financial issues - Limited diversification of revenue
Both cinemas and theatres depend heavily on ticket sales and secondary income streams such as concessions and merchandise. Having such a limited range of income source could make your business vulnerable to financial instability, as if one of these key sources decreases, or fails, revenue will fall which could lead to a struggle to maintain cash flow[RJ1] and your solvent position. We can help you understand the solvent position of your company and the options available to your company. - Bounce Back Loans (BBL)
The government-backed Bounce Back Loan Scheme provided a lifeline for many businesses during the COVID-19 pandemic. However, companies are now struggling with BBL repayment terms. We can help guide you through the available repayment options and explain how a BBL will be treated in different insolvency scenarios.
How we can help rescue your cinemas or theatres
Below are two formal insolvency procedures, which would allow a cinema or theatre to continue trading whilst being protected from creditor action:
- Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
A (CVA) is a structured repayment plan that allows businesses to manage their unsecured debts through affordable monthly payments to creditors. The procedure typically lasts five years and upon completion, the remaining unsecured debts at the company will be written off. By entering a cinema or a theatre into a CVA, your company will be protected against creditors, giving you the opportunity to continue with trade and to maintain your company’s brand and reputation, whilst slowly reducing the debt level.
More on a Company Voluntary Arrangement - Restructure your company through administration
By placing a cinema or theatre into administration, it will be in a temporary state of protection that allows business to continue trading. A licensed insolvency practitioner will take on the role of administrator, aiming to return the company to a profitable position and will look to rescue the business as a viable entity. This may mean restructuring the business, streamlining operations, making staffing changes or finding new investment. The administrator may also consider sale options as a means of exiting the business, with the possibility of preserving the company brand safeguarding jobs, whilst also maximising a return to creditors.
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How we can help close and liquidate your cinema or theatre
If your cinema or theatre is insolvent and creditor pressure has reached a level which means the business cannot continue to trade, the formal liquidation of your company would draw a line under its operations and write off its unsecured debts.
- Close your cinema or theatre down via a Creditors Voluntary Liquidation (CVL)
A CVL is a formal insolvency procedure carried out by a licensed insolvency practitioner (IP) for companies that are insolvent. By entering a CVL, your company would cease trading and once closed, would end all of the company’s obligations. The process will see the company’s assets realised to raise funds for creditors, while terminating outgoing payment agreements like loans and leases. Once a CVL procedure is finished, any unpaid unsecured debts and arrears will be written off. Eligible, employees and directors will be able to apply for statutory entitlements such as redundancy and holiday pay. If the company cannot afford to pay staff entitlements, claims can be made through the Redundancy Payment Services.
More on Creditors Voluntary Liquidation - Close your cinema or theatre down and start again via a Pre-pack Liquidation
A pre-pack liquidation is an informal term for a type of liquidation where a newly formed company pre-purchases the assets of an existing company that is then liquidated. If you’re company were to enter a pre-pack liquidation, it would allow you to continue operations its core business in a new limited company, without any historical unsecured debts associated to the previous company. With minimal disruption to the business’s brand, customer base and operational activity, the new limited company can retain essential assets, such as projectors screens, lighting and sound systems and under TUPE regulations, key employees can be transferred. In some cases, you may be able to reuse your company’s trading name, but this can be complex. We can advise you on these processes and how it works.
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Commercial finance for cinemas and theatres
If your company has steady cash flow but is at risk of being impacted by a significant upcoming payment, commercial finance could provide the support you need. There are several financing options that can help you manage one-time expenses or cover shortfalls in revenue. Contact us to explore the best commercial finance solutions tailored to your company’s situation.
More on commercial financeHow to get in touch with us: The next steps
If your cinema or theatre is facing financial difficulty, it’s important to understand the different closure and recovery options available. Our initial advisers will offer a comprehensive explanation of the different options available to you and our experienced consultants will look at tailoring our processes to your company’s circumstances.
Contact our initial advisers, who can advise you on your company’s solvent position and outline the options best suited to its circumstances.
- Speak with our initial advisers
Contact our team via phone or online chat. If we can help, we will arrange a free consultation with one of our consultants to discuss your situation in more depth. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or what alternative options are available. - Formally engage with Wilson Field
After your consultation, if there is an appropriate route forward, we will issue the relevant documentation for you to formally engage us.
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