Press, Policy & Research
R3 Blog

 

Back to Business campaign: Preparing directors for the future

Back to Business campaign: Preparing directors for the future

25 June 2021

After a year like no other, and with considerable uncertainty remaining about what will happen in coming months, directors and business owners could be forgiven for being unsure about the best path forwards.

That’s one of the reasons why R3 has launched our Back to Business UK campaign, aimed at helping directors know where they can go for high-quality advice, and what options are open to them if they need to restructure their business.

Although the pandemic’s impact was unprecedented, what is not novel, unfortunately, is that rogue advisors and fraudsters will take advantage of unsettled circumstances to try and gain new clients. Cases where unlicensed and unregulated rogue advisors have been previously involved invariably experience delays in business owners accessing reputable advice, and complications which add extra cost onto the rescue attempt process.

To ensure that directors and business owners understand their duties, options and have a straightforward guide to reputable sources of help, we have published a new guide, “Get Back to Business: A guide to dealing with corporate financial distress”.

With the recovery phase after a recession often the most dangerous period for companies, as the longer-term consequences of the economic shock work their way through the economy, we hope that this guide will be a key source of support to directors looking for unbiased and objective information.

Rescue as the priority

As any insolvency and restructuring professional will tell you, rescue is always the first consideration in any case of business distress. Where at all possible, members of the profession will attempt to rescue a business, and preserve jobs. Indeed, our recent Value of the Profession report found that, in 2019, the insolvency and restructuring profession rescued 297,000 jobs and 7,200 UK businesses, with nearly four out of ten (39%) businesses advised by R3 members still open after their insolvency procedure concluded.

As set out in the guide, there are a number of solutions, both formal and informal, open to companies in distress. Informal solutions can be undertaken by directors themselves, although many directors and business owners choose to take advice from an expert and qualified third party, such as an insolvency practitioner or restructuring professional. Steps such as debt refinancing and/or consolidation, negotiating with creditors, and seeking new sources of external financing would fall under the heading of informal solutions.

Formal solutions, meanwhile, are those which are included in the Insolvency Act 1986, and which require the involvement of an insolvency practitioner. The first statutory purpose of an administration, for example, is the rescue of the company involved as a going concern; it is only if this purpose cannot be fulfilled, in the opinion of the administrator, that the process moves on to the next purpose, namely achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration).

Pre-pack administrations, meanwhile, were developed as a way of rescuing businesses, by selling them in whole or in part shortly after the company is put into administration, thus minimising disruption to employees and clients. Company Voluntary Arrangements are another rescue-focused procedure, and requires creditor assent (following a vote).

In addition, last year’s Corporate Insolvency and Governance Act introduced the moratorium, a new procedure, overseen by an insolvency practitioner, which is designed to give companies in financial distress a period free from creditor action in which to decide on a rescue plan.

In all of the procedures above, the insolvency practitioner who is acting as office holder will act in the interests of all creditors, and will be subject to stringent regulation.

Backing businesses in the recovery

To repair the economic damage wrought by the pandemic, and to address future challenges from decarbonisation to filling the productivity gap, directors will have to think creatively and ensure they have plans in place for most eventualities.

This may be easier said than done, but – with our guide – directors and business owners should at least have access to an outline of the options for business rescue and transformation open to them, and to sources of more detailed help and advice.

·       Get Back to Business: A guide to dealing with corporate financial distress

 

Share this page
For more information please contact
James Jeffreys
James Jeffreys
020 7566 4220
James JeffreysJames Jeffreys
Head of Press, Policy and Public Affairs
020 7566 4220
Stuart McBrideStuart McBride
Communications Manager
020 7566 4214
Giorgio ButtironiGiorgio Buttironi
Public Affairs Manager
020 7566 4227
Find INSOLVENCY & RESTRUCTURING ADVICE

R3 members can provide advice on a range of business and personal finance issues. To find an R3 member who can help you, click below.