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How’s Your Business? Stepping into the minefield?
The nation has been in the doldrums of a slow-growth economy for nearly a decade now. More and more companies are engendering significant debt or compiling unmet obligations. All will be facing the very grim prospect of a bankruptcy filing or major significant financial restructuring on their professional horizon.
Bankruptcy filings and other debt restructuring are actually communications events. The financial elements can be planned well but only if the firm’s communications are brought into the pro-cess in an extremely timely fashion. To grasp the difference look at a number of elements that characterizes such communications, whether the process involves reorganizing a company’s balance sheet outside of court or formally via a Chapter 11 filing. These various factors are quite critical to understand in order to develop effective approaches to managing any and all related communications processes along the way. It is just one reason to have the right attorney on your side through the process.
Unlike a crisis situation where a singular, distinct event transpires, altering communication priorities in an instant; the road to a restructuring is typically very long and winding. It can take many months between the points when a company is starting to have financial problems — declining sales, ballooning debt, missed quarterly revenue or earnings projections — and the other point when it becomes apparent that the company does not have the capital necessary to fund operations and/or meet obligations to creditors. In addition, proposals between the different parties involved are often negotiated over for months before even the framework of a solution can be developed. It is a very long and complex process. Communications, no matter how trivial, be-come vital when a firm walks through the minefield of business bankruptcy. Again, the right attorney can guide you through that minefield.
Let’s examine that treacherous landscape. Every creditor payment deadline looms increasingly large. Each brings with it the possibility of the company’s management and lenders applying a long- or short-term fix for the company’s balance sheet. This can be a bridge loan or forbearance agreement that gives the company a lifeline of several weeks or several months.
If an interest payment is ever missed, the stakes rise significantly. The chance that news about the company’s struggles going public vaults up exponentially. For companies involved in restructuring their debt, this news generally comes through the form of declines in a company’s credit rating. That drives away future business. Rating agencies will announce it to their clients and sometimes issue press releases. That’s when the business media will start making inquiries and writing articles about the company in question.
For any organization involved in a financial restructuring, it is absolutely imperative to understand the flow of the process. Remember, it all takes place behind closed doors. As well, there are many triggers that cause it to become public. Each and every step could end everything.
One of the most singularly defining characteristics of a business financial restructuring process is the vast uncertainty surrounding it. One false step and everything blows up. In any type of classic crisis situation, quick and decisive communication is strongly needed to counter the immediate potential damage to a company’s reputation. The way forward and the endgame in a corporate turnaround are far from certain if you do not plan for it from the get-go.
When a restructuring process takes place there will be different defined paths of potential resolution. As different avenues for resolving financial issues are explored, each scenario is in constant flux and that, in turn, means there needs to be communications plans for any of a variety of outcomes that need to be in place to ensure the process is properly managed.
One day it may look as though a company’s current owner will invest additional capital to shore up its balance sheet. The next day the owner may have a change of heart and the business’ board of directors and management team may start preparing to file for bankruptcy because the owner and lenders couldn’t reach an agreement on terms
This can make the decision of when and what to communicate internally and externally a tough one, and the communications team cannot get married to one response. For example, if the situation appears to be on its way to a positive resolution, you don’t want to communicate too early when the outcome is not settled. However, if the rumor mill starts up, you may need to leverage the progress to assuage concerns. Yes, a step backward…
Communications are vital every step of the way in the business. Need Help?
Stewart Lim can guide you safely through the business bankruptcy minefield.
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Bankruptcy. Far from the negative connotations of the past, today it is viewed as a real tool, a helpful method of assisting people who can no longer keep up or pay their debts. Bankruptcy laws are crafted to assist ordinary folk who are in financial hardship, to find one of several pathways to make it through their difficulties.
Bankruptcy offers a fresh start to people by creating repayment plans and/or wiping away segments of existing debt. Aside from individuals, bankruptcy laws also protect financially troubled businesses and homeowners.
Filing bankruptcy can help a person by discarding debt or making a plan to repay debts. A bankruptcy case normally begins when the debtor files a petition with the bankruptcy court. A petition may be filed by an individual, by spouses together, or by a corporation or other entity.
All bankruptcy cases are handled in federal courts under rules outlined in the U.S. Bankruptcy Code.
There are different types of bankruptcies, which are usually referred to by their chapter in the U.S. Bankruptcy Code. It sounds simple, but like anything dealing with legal issues, the courts and the government, the pathway is very complex. It is filled with all manner of details and pitfalls awaiting the unsuspecting person.
Although you can file by yourself, even the government strongly urges you to seek the advice of a qualified lawyer. Bankruptcy has long-term financial and legal consequences. The Law Offices of Stewart Lim are experts at guiding you through the turbulent currents of Bankruptcy court. Feel free to contact us anytime for a free consultation.