Over the past few years the “pre-insolvency” profession has been muddied by advisors who are not properly accredited or have the skills required to advise on restructuring.
Here are the top three things every director should consider before taking restructuring or insolvency advice from an advisor.
1. Check qualifications
Not all advisors are qualified or regulated.
All practitioners and other associated professionals who specialise in restructuring, insolvency and turnaround are regulated by the following organisations:
- Australian Restructuring Insolvency & Turnaround Association (ARITA)
- Australian Securities & investments Commission (ASIC)
- Australian Financial Security Authority (AFSA)
If you are considering insolvency or restructuring advice, we recommend reviewing the credentials of any professional involved in your business.
Both ASIC and ARITA have recently called for more regulation and oversight on the industry. Some ‘pre-insolvency advisors’ have been accused of assisting financially distressed companies by facilitating phoenix activity.
ASIC as well as the ATO have recently stated they plan to continue investigating unregulated advisors.
2. If it sounds too good to be true – it probably is
Following the wrong advice could lead you down a long dark path that costs you more time and money. It could also put you at risk of prosecution.
If you have been advised to asset strip, destroy books and records or to take steps to hamper future investigations, you may be engaging in illegal activity. Our Restructuring division has previously been engaged to assist directors who have followed poor advice.
We have also learned of directors receiving calls from ‘pre-insolvency advisors’ promising easy turnaround solutions. This is not always the case.
If your business is starting to show signs of distress, seek out professional advice as soon as possible. Here is a helpful article that addresses why managing the issues early on may result in a more favourable turnaround process.
3. Take a look at the bigger picture
An experienced, qualified restructuring advisor will be knowledgeable in turnaround as well as the other areas within the business, such as taxation and employee management. A trusted advisor will consider all stakeholders (the directors, employees and creditors) of your business and advise you on the best course of action.
They will also have relationships with other professional advisors (such as bankers and lawyers) and can often facilitate introductions that could help ease the burden of the restructure as well as assist in obtaining new financing or direction.
If your business is experiencing distress, seek a professional who can look at the “bigger picture” and consider all available options.