What is it with RBS that they are so keen to hide in the GRG saga which unscrupulously damaged so many viable businesses?

Today the Times reports that The Financial Conduct Authority continues to resist calls from MP’s and affected business owners to disclose the full results into its review of the scandal-hit Global Restructuring Group. It appears that the FCA when commissioning the report told the reviewers to prepare it on the basis that it could be made public. Now the FCA claim that such reports are not intended for publication despite requests from the chair of the Treasury Select Committee to publish it. RBS, having misled that committee before seems to be obfuscating by so called “Maxwellisation”. Now it appears that the long grass is the FCA’s preferred destination.

Why commission an independent and objective report if embarrassing facts will be hidden from the MP’s, public and the affected parties? Who are the FCA trying to protect? Surely RBS cannot do more damage to its tarnished reputation. What does matter is the who, the why and the how. Who because if they have wronged they need to answer to the law. Why because the smoke goes beyond just GRG and its employees to the ultimate decision makers who shouldn’t escape reprimand. And how because there is something very wrong with the UK bankruptcy process if it facilitates such blatant abuse of creditor rights.

Vested interest is at play here. That is not what the public want nor deserve. The truth should out and the culprits named and shamed. The lessons exposed need to be actioned against. Laws need changing to better balance creditor and debtor rights in distress and protect the entrepreneurial process.

For the benefit of UK business stop the procrastination; publish and let the wrongdoers be damned!!

 

Alan Tilley – Chairman, BM&T
3rd October 2017

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Half year 2017 statistics from UK and USA on insolvencies and Chapter 11’s show a continuing downward trend from an already low base in these countries. What activity there is focuses on the usual suspects; oil and gas, shipping and retail, but the absence of corporate restructuring in formal process in services, IT and general business sectors points to something deeper than the economy. Trends in the restructuring profession and the move away from insolvency into growth in turnaround and solvent restructuring practices is proof if it is needed that change to legal frameworks to encourage consensual restructuring is working. Change is also happening in Germany where insolvency specialists, mainly lawyers by training, are migrating back into corporate law. Further change in German insolvency law is awaited to conform to the recent EU Business Insolvency Directive which requires member states to introduce a consensual restructuring regime. Expect this to happen after the September national elections. German insolvencies will to continue to fall.

Evidence may be anecdotal as there are no statistics recording consensual restructurings. Also, there is no bright line at which a debt renegotiation becomes a distressed consensual restructuring. It is difficult to see that there will be ever be an accurate number. But as banks redress their balance sheets, both political and commercial pressures are moving them to seek change “under the radar” and away from headline grabbing insolvency. It takes time to change an ingrained process where at the first sign of distress a workout banker would pick up the phone to an insolvency firm but progressively banks are getting more accustomed to avoiding the value destructive “i word”. But, redressing balance sheets only is not a long-term solution for a non-performing company. Saving companies and preserving stakeholder value needs attention to cash flow, profit and loss accounts and operations. Experienced management guidance if not management change is required to achieve this. It is here that Turnaround management becomes more than just financial management and broader business skills are required.

Whereas in the USA where the Chapter 11 process introduced a new breed of Turnaround managers with operational experience as CRO’s the same is happening in Europe. Insolvency professionals, used to working in a strict legal environment, must adapt to a more commercial environment and absorb broader management skills. Some are fighting a rear-guard battle to keep control of debt moratorium processes. A case in point is delay to new legislation in UK where we continue to wait the outcome of the UK Government’s “Consultation on the Insolvency Framework”. Opinion was divided between the Insolvency community and the Turnaround community on control of moratoriums. At first it seems the insolvency profession is winning the debate. Notwithstanding Brexit however, the direction of travel being taken by the new EU Business Insolvency Directive highlights the need for a non-insolvency tainted process in the UK. Let’s hope the government takes the more enlightened business approach and embraces that flow. Live companies are worth more than dead companies and nothing is going to change that.

 

Alan Tilley – Chairman, BM&T
2nd October 2017

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