The SME Director: The Advice Quandary: Should I take it?

If your company is struggling, is it worth taking advice?

When the media speaks about corporate failure it generally seems to have in mind massive retail chains or construction conglomerates, heavily levered into different classes of debt. Very often there are easily identifiable business units within such companies that can be sold on and that are obviously profitable. Sometimes this all seems very alien to a company director in an SME business that is struggling to afford the cash to even obtain advice.

Restructuring advisors have a vested interest when we say SME businesses need advice. However, we work across borders with many different size of business. It is not only commercially frustrating but morally troubling that directors of the smallest companies are the ones most likely to be struggling without getting support.

We would suggest in the SME sector there are a number of things that directors should bear in mind when thinking about whether to obtain specialist advice in times of financial distress:-

  1. Restructuring Lawyers, and indeed Insolvency Practitioners, will generally be willing to consult, initially, on a no obligation basis so they have an idea about how and on what basis they may help a company restructure.
  2. Given that a failure to take advice in likely to render a breach of duty claim/disqualification proceedings against directors personally, potentially more likely, it must be sensible for directors to have at the very least that initial consultation
  3. In SME businesses it is far more likely that directors will have granted personal guarantees. Their personal assets are already therefore on the line. It may therefore make a lot of sense, understanding of course that conflicts between directors personally, and their duties to the company, will have to be managed, for directors to invest in the company getting good quality advice.

We should say by way of encouragement to directors: While it is still the case that certain businesses will reach the end of their life because of changes in the market or because of debt burden etc, if there is a company with a good core business that has simply been impacted by COVID, there has probably never been a better time to restructure such a company. Creditors are in general, with a few exceptions, working far more consensually with debtors. However, that depends on sensible transparency and clear communications. It depends on taking advice early

BBM remain very happy to have no obligation discussions with directors on a strictly confidential basis about how they may be assisted.

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