Communications key in new insolvency landscape
• 4 minute read
The UK’s corporate insolvency framework has undergone a radical shake up.
In response to the very real risk to businesses posed by the coronavirus pandemic and subsequent lockdown, the government has fast tracked a series of reforms aimed at stemming the potential tide of corporate insolvencies. The reforms were introduced to Parliament in the Corporate Insolvency and Governance Bill on Wednesday 20 May and look set to receive Royal Assent in short order.
These reforms are broken down into a series of temporary and permanent measures, most of which have received a warm welcome from the business community, including UK Hospitality – representing some of those businesses who have been hardest hit by the lockdown. Colin Haig, President of insolvency and restructuring trade body R3, said the Bill would “support the profession’s efforts to help businesses navigate the enormous economic damage caused by the pandemic – this legislation comes not a minute too soon.”
The government should be applauded for doing all it can to support businesses at this difficult time and, vitally, to seek to preserve jobs.
Clearly, though, given the speed at which these reforms have been introduced there are likely to be teething problems, and it remains to be seen just how far the various measures will have a meaningful impact on the volume of businesses who are or will be facing financial distress. The repercussions of the coronavirus pandemic are likely to have a long tail, impacting the cash flow of many enterprises deep into 2021 and potentially beyond as other commercial factors come into play – not least the pending removal of furlough and the expectation of companies to begin paying a higher proportion of staff salaries currently covered by the government’s job retention scheme.
For some businesses the reforms may have come too late. Just a week after the Bill was introduced Sky News reported that Monsoon / Accessorize was on the brink of appointing administrators. Other well-known brand names are likely to follow, with the coronavirus outbreak in many cases being the straw to break the camels back. The retail industry, in particular, has been battling with a prolonged period of disruption and those businesses which were struggling to adapt prior to the pandemic will now be facing an even more difficult working environment.
There will be significant PR and communications challenges, too, for brands and insolvency practitioners who seek to utilise the new measures.
For those embarking on a new restructuring plan, or entering into an administration with a view to affecting a sale of the business as a going concern, the retention of brand value in order to maintain customer/client share of mind, attract investment or attract a buyer is fundamental. And at all times and in any insolvency scenario careful and considerate communications and engagement with those affected are vital and a part of the insolvency practitioner’s duty of care (not least with staff and suppliers).
One thing remains certain. The media and public now speak the language of insolvency, and this means there will continue to be significant scrutiny of company failures (and rescues) and the efficacy of the government’s reforms – requiring careful communications management by brands and by insolvency practitioners seeking to help businesses navigate a route forward in these difficult times.
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