Today’s Accountancy Age highlights the gloom in the UK insolvency market as corporate and personnel insolvencies continue to decline. “Gormenghastian gloom pervades insolvency market”, its headline screams. “There is a greater focus on value for money” comments one IP. Another quotes “it’s all down to pragmatism-in many cases creditors are choosing to get something back than nothing”.
Well blow me down! The market is finally waking up to the fact that a deal done consensually will pay back more than insolvency where the dreaded Insolvency word knocks goodwill and asset values for six, and IP’s fees take a further slice of what’s left. Add to that the headlines of over aggressive recovery by secured creditor banks, still in the government’s firing line, and it is not difficult to see the why attitudes are changing.
In fact the market is moving quicker than the law and the law is moving quicker on the continent than in UK. In France, Italy and Spain pre insolvency rescue processes have been introduced and the EU Regulation now encourages member states to introduce similar processes. The UK it appears is nowhere near following that advice. For a country that copper plates almost every directive that emanates from Brussels there is a strange reluctance to adopt one of its more sensible proposals.
Fortunately more savvy professionals have cottoned on to the benefits of Consensual Creditors Compositions, persuading often reluctant creditors with the merits of patience and forbearance whilst a practical turnaround plan is implemented. This requires a balance of skills from the financial skills to stabilise cash flows, refocus the business and business plan and manage stakeholder expectations through negotiation whilst implementing the plan improvements. IP’s who are underweight in management expertise and overweight in insolvency processes are not always best equipped for the task. It can be too easy when faced with a debtor deep in the zone of insolvency to take the high fee low risk option at the expense of jobs and unsecured creditors.
The fact is the market is changing and the professionals that operate in it are changing too.
Alan Tilley – Principal, BM&T
23rd July 2015