Lawyer Monthly Magazine - February 2019 Edition

57 Professional Excellence www. lawyer-monthly .com FEB 2019 loyal customer base, then there might still be time to do something positive; in this scenario in order for an effective turnaround to take place, you have to create a degree of breathing space - both fiscally and mentally -, and procedures such as the company voluntary arrangements (CVAs) can provide the much needed time to reorganise debt and think about whether you, as the owner, really want to keep going. Surprisingly, the use of moratoriums in CVAs aren’t that common and until the Court of Appeals decision in the JCAM case 1 , the use of Net Operating Income (NOIs) to buy a bit of time was the preferred route for business owners to obtain some space to consider their position. Whilst it still remains an option in the right circumstances, any proposal to appoint an administrator now requires to be made with a “fixed intention” to follow it through, and so what will happen as a consequence of this decision still remains to be seen. Being able to read the danger signs of a troubled business is not always easy when you are in the middle of it and for many directors under pressure, seeking professional assistance seems to be a waste of scarce resources when there are bills to pay. However, acting early enough and being armed with the information necessary to save a business is not always all of the difficulties caused by a very complicated trading environment, for most SMEs the end game is clearing the month. As a business owner, if you find yourself two days away from the month-end and you don’t have enough cash to pay the wages, you’re probably looking at initiating one of the formal insolvency procedures, as aside from anything else, a number of the director’s duties are engaged with cashflow solvency and balance sheet solvency tests will now come into play. If you are at this stage, then the chances are that the warning signs have been ignored over a fairly prolonged period and there is little that can be done to salvage matters, except to enter into a formal insolvency procedure. In such an event, restructuring options, such as administration, becomes the obvious choice, and taking the advice of the administrator then becomes a legal obligation. Here, the administrator operates the Company on behalf of the creditors and looks to salvage as much as possible with a view of enabling the company’s survival. However, if you are constantly bumping the overdraft limit and your loyal receptionist is pretending that you aren’t in the office to take that creditors call, and yet you’ve miraculously still have a Niall Macpherson-Mickel Niall is currently Consultant Legal Counsel at England Palmer Solicitors, Guildford and London, and advises clients in relation to all aspects of international commercial litigation, corporate restructuring, arbitration and cross- border dispute resolution. In his spare time, Niall is also a rock and ice climber, ski- tourer, qualified mountain and ski leader and BASI trained Alpine ski instructor. Niall is also a member of the European Regional Forum for Barristers and Advocates of the International Bar Association, as well as the Institute of Chartered Accountants of England and Wales Insolvency and Restructuring Group. Niall is the winner of the 2019 FM Restructuring and Insolvency Lawyer of the Year award. 1 https://www.casemine.com/judge- ment/uk/5b2897d92c94e06b9e19c48a enough; directors must not have acted unreasonably in terms of their legal duties, as having the resource of an experienced adviser is hopefully a massive cost saving to the business in the longer term. There is obviously life after restructuring, and one might only hope that the lessons of the past will help shape a brighter and more sustainable future for all concerned. If a rescue is to be effective, a business must embrace change. The old ways evidently did not work, and a new vision is required. Change must not only be seen to occur, but actually has to occur; overcoming engrained cultural resistance at Board level is often too difficult, as the fabric of a business is at times so tightly interwoven with the personalities of its founders or Board members that in attempting to separate things out, the inadvertent result is simply to unravel the entire venture. In such circumstances the obvious answer is selling to someone who is willing to change the way the business works or in the alternative, allowing an administrator to deal with matters effectively, however, the costs of this process will inevitably mean that few pennies in the pound will see their way back to creditors. LM