Professional Advice
Its easy to shun the professional advisors when things start getting tough, especially when you are worrying about money and costs. The most successful people recognise their own skill sets and surround themselves with experts for everything else.
Tap into your professional advisor’s knowledge and their network of contacts to find the right advice. Professional accountants, lawyers and restructuring professionals are all really good sources of advice, with the latter being professional problem solvers and strategic solution finders.
Creditor Focus
Enhancing shareholder value is the typical focus for a business, with an emphasis on growth and dividends. When faced with financial challenges however, the Board of Directors must consider the creditors interest above the shareholders. Making sure that value is protected for creditors and their financial position is not prejudiced is key to the Board mitigating their risk of future criticism and potential wrongful trading or misfeasance claims.
Cash Runway
How much cash have you got before you reach the end? How long is the runway? A short-term cash flow forecast will demonstrate this for you as long as it is realistic and has appropriate assumptions. Having a professional outside of your business prepare or just review it will help you see any potential pitfalls or issues ahead of time, which is critical to adapting an appropriate strategy. It is the timeline that allows you to logically consider your next move and strategically evaluate the impact on value, your creditors and wider stakeholder groups.
Continue or cease?
The more time you have to strategically plan, the more options are available. This, in turn, will likely lead to more value retention, better chances of the business continuing and a better outcome all round. It can sometimes help to look at what cessation of trade looks like and work backwards from there to get to the better and best result. Your professional advisors will help you paint this picture and it will usually help the Board in making the right decisions and protect their position too.
Antecedent Transactions
These are the sorts of transaction that would normally be fine, but if you are insolvent then this could result in a future lawsuit. They might look like putting someone in a better position than another, selling assets for less than they are worth, giving away value or putting it out of reach of the creditors. These things can easily happen without the right advice early on and the Court can order for a transaction to be reversed or the Company to be compensated for the loss. Boards should be mindful of the risk of them personally being asked to contribute to lost value too.
Life Saving
Everyone needs guidance from time to time or a life saving hero. Time is important, early support, intervention or simple guidance is crucial to navigating through distressing and difficult scenarios.
Surround yourselves with the right advisors, problem solvers and strategic solution finders to help you climb the mountain and swim the seas. They may end up being your corporate life saving hero’s.
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