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MEETING
MARKET NEEDS
It wasn't that long ago, that
the penalty for business failure activated by creditors was imprisonment
- and sometimes transportation. Although
there might be a wish in some quarters for these penalties to return,
we have come a long way since then - and the role of the insolvency
practitioner has changed as new legislation has met the needs of the
market place.
The recession of the late 80's taught Banks, suppliers of credit and
Governments a lot, after all they were the major losers in the worst
economic conditions in living memory, with losses of 30 billion and
maybe more.
The length and depth of the recession and the
financial pain that went with it, with no quick up-turn this time to
mask some of the effects,
made Banks realise that the food times don't pay for the bad in a fast
moving economy. Even the suppliers of credit to trade and industry
and where margins have always been much higher than at Banks, had to
come to terms with "big hits" that could, and often did, result in
their own corporate failure.
In that environment the wholesale write-off
of marginal debt, which might have been a route in better times, no
longer became an option
- keeping the "patient" alive by using the skills of professional
and wiser bank managers with better systems became the new strategy.
So the 1986 Insolvency Act with new procedures to support the rescue
culture came into its own and the new role of the insolvency practitioner
as a business rescue specialist was born.
It was also a learning time for government, for them, a significant
drop in income, the considerable cost of propping up sterling against
strong currencies and the economic cost of the dole queues. With
nationalisation out of the window and a squeeze on government local
and central, expenditure the only feasible route to improve the situation
was to promote an enterprise culture using the skills of the professional
and the support agencies. The strategy has worked quite well in both
Administrations.
But a new focus on the entrepreneur is starting
to make an impact. The penalty for business failure has never been
so severe in the
USA as in this country, and where the support for the "born again" businessman
has always been keener. There are of course many reasons why businesses
fail - although bad management is generally the root cause. But if
the failure is caused by external problems outside of the entrepreneur's
control, for the right man or woman, with the right product then
a re-start through a rescue procedure must be "win - win" situation
It's a win for the proprietor, his family and his employees, the
bank, his accountant, his creditors and not forgetting the Inland
Revenue and Customs and Excise.
In any enterprise culture we do need to keep an eye on the wayward
director, who seeks to make personal gain in a business failure.
For them the penalty of disqualification and sometimes imprisonment
is real, and although the process has been historically slow, new
legislation to fast track disqualifications will come onto the
statute books shortly. All part of the new and welcomed rescue
culture.
If your business has emerging problems and you would like to speak
to somebody, speak to Jeremy Priestley on 0114 275 5033 without
delay.
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