Business owners, creditors and accountants with SME clients in distress often seek the expertise of restructuring and insolvency practitioners when all is lost, regarding them as the corporate undertaker.
But the restructuring and insolvency sector has gone through more than a decade of change and now acts to save SMEs. Today’s insolvency practitioners work with accountants to protect, revive and restore their clients’ businesses rather than to seal their fate.
This change in approach is largely down to the Enterprise Act. Following its arrival on the statute books in 2002, the act aimed to streamline the previously complex process of appointing an insolvency practitioner as an administrator of an insolvent business. It was designed to introduce a rescue culture, breathing new life into challenged corporates and was hailed at the time as a white knight riding to the rescue of troubled clients.
Today’s insolvency practitioners work with accountants to protect, revive and restore their clients’ businesses rather than to seal their fate
When appointed as administrator, the insolvency practitioner is charged with seeking to ‘rescue the company as a going concern’. All alternative options have to be considered including a sale to a third party, but if none is feasible then the administrator advises creditors why the business is not a going concern.
Tragically, and at great cost to many companies for whom the bell tolled, this so-called rescue culture hasn’t been embraced as the law intended. The perception that insolvency practitioners are a last resort when all is lost has accordingly remained. It needs to be changed.
Act fast
The insolvency profession has worked hard to prove that it can work proactively and collaboratively with accountants and their SME clients well before issues on their balance sheets begin to worsen.
If accountants spot the warning signs in vulnerable clients three, six or even 12 months ahead of a potentially avoidable demise, they should engage an insolvency expert at that point. By having an insolvency practitioner called in sooner rather than later, the client can benefit from potentially life-saving services, including access to additional finance, human resource advice and a fresh perspective.
Team of all talents
As key workers for their clients during the pandemic, accountants can also play a major role in helping to change clients’ perception of insolvency practitioners.
By sharing their expertise with insolvency practitioners, the two professions can be a team of all talents, delivering a collaborative and holistic service to SMEs so they can thrive rather than just survive and, ultimately, avoid insolvency.
With complementary skillsets and shared expertise, accountants and insolvency practitioners are ideally placed to build a bilateral relationship to benefit the UK SME community.
