And the Winner Is…
What happened to the envelope? It was never clearer than when watching the 83 rd annual Oscars that there was a breakdown of the checks and balances which resulted in the error during the announcement of the best picture award. No industry, region or culturally significant event is immune from the effects of a disastrous mistake, incompetence or in some cases deliberate fraud. In the financial industry, when disaster strikes, many innocent victims are affected due to the loss of jobs, loss of financial investment and in some cases, economic and market meltdown. Victims are left with puzzling and unanswered questions – who was responsible, how did this happen and most importantly – what is being done to fix it?
Cross border insolvency professionals are seeing a surge of companies around the world facing significant financial distress and declining asset values, which are increasing the number of bankruptcy or insolvency proceedings in their home jurisdiction and globally. While it feels bleak, all is not lost because restructuring professionals can provide a proposed course of action and solutions that best suits the circumstances. Some of the alternative courses of action include:
1. Advisory – appointing an advisor to assist or drive a process of working through a negotiated resolution with key participants. This also avoids the time and expense of adversarial proceedings and can preserve the existing relationships with suppliers and customers. It affords an opportunity to treat the stakeholder groups differently and is less costly and usually faster than a formal administrative or court process.
2. Restructure – where there are multiple and competing interests, it may require the appointment of a restructuring professional to operate the company, whether under Court supervision or not, and to negotiate the sale or restructuring of the assets or business. This is a more transparent process, however there are often significant costs associated with this outcome.
3. Liquidation – court supervised liquidation or bankruptcy proceedings are transparent and management is no longer involved once the insolvency professional is appointed. These procedures are best suited where a company is too weak to continue and where reorganisation is not feasible. In circumstances of fraud, the court appointed liquidator will undertake investigations into the financial position of the company to find potential areas of recovery in order to make a meaningful distribution of assets to creditors.