SAVING YOUR BUSINESS
By the Restructuring, Insolvency & Special Situations Group of Sugar Felsenthal
Know What You Don’t Know
The expression “a little bit of knowledge is a dangerous thing” is applicable when considering whether to be your own attorney.
When your company is in distress, you cannot stick your head in the sand. Time is not on your side because your options decrease with each passing day.
Bankruptcy is Often Not the Answer
The owners of a financially troubled company may reasonably assume that filing bankruptcy is the answer to the problem. Bankruptcy, however, is only one option. And it is often not the best option.
The reasons for this misconception are two-fold. First, bankruptcy is the best-known option among attorneys and accountants who do not typically work with financially distressed companies. Second, many attorneys know how to file a bankruptcy case but do not know how to use the other options that may be available to help distressed companies.
Selecting the Right Attorney is Critical
Selecting an attorney can be more difficult than selecting other professionals, because it is often difficult to see immediate visible results. This is true, regardless of why you need an attorney, but is especially true when your business is at risk. How do you select the right attorney? The attorney you select should:
- Have a practice focused on corporate restructuring and insolvency
- Have deep experience representing companies of your general size
- Be well-versed in all the various tools your company may need (e.g. out-of-court workouts, Articles 9 sales, and assignments for the benefit of creditors, as well as chapter 11 and chapter 7 bankruptcy)
- Be able to provide you with references from current and former clients
- Be easy to speak with and able to explain things so you can understand them
- Be willing and able to recommend a specific course of action
- Be supported by a law firm of other attorneys who have substantial experience in the other areas of the law that are likely to be germane to your company’s issues, and with whom your attorney has a history of closely working as a team.
Some Rules of the Road
Every company’s situation is different and legal strategy and tactics need to be customized. There are, however, some general guidelines that most companies in financial distress should follow:
- Do not deny the severity of your company’s problems
- Hire an experienced corporate restructuring and insolvency attorney
- Do not offer more collateral, personal guarantees, or releases without first hiring and consulting with restructuring counsel
- Understand that the attorney-client privilege allows you to share all relevant information with your attorney and that you must be open and forthcoming to get the best results
- Do not make promises you cannot keep to your lenders or other creditors
- Communicate clearly and consistently
- Focus on the big picture; the most elegant legal document or most detailed financial model is worthless if it doesn’t advance your goals
- At the same time, your goals should be realistic, and you can’t know what’s realistic unless you understand your legal and financial position
- Be flexible - situations are usually fluid
- Don’t lose your cool
- Be willing to take appropriately aggressive positions
- Your credibility is key – do not give ultimatums unless you are prepared to follow through
Click here for more information about Sugar Felsenthal Grais & Helsinger’s Restructuring, Insolvency & Special Situations Group or email turnaround@sfgh.com to be contacted for a free confidential consultation.