The Balancing Act Lawyers & Restructuring Insolvency Professionals – Working Together

2016-05-17   minute read

Sheri Aberback

There are many reasons why a business may find itself facing financial. Contributing factors can trigger a host of underperformance issues including declining earnings, liquidity and cash flow concerns, and stakeholder pressure. To a large extent, demand for restructuring and insolvency assistance runs counter-cyclical to the economic situation; when times are hard and businesses are struggling to fulfil financial agreements made in happier times. As we struggle in an economic downturn and a weakened loonie, many Canadian businesses are looking for debt solutions that allow them to manage their financial obligations and get back on track to driving growth.

People often ask why it is necessary to have both lawyers and restructuring professionals in a restructuring process. The answer, as you can imagine is simple but complex. Restructuring is usually the first stage in the process of agreeing a way forward with creditors in order to manage repayment of the debt, without the client becoming insolvent. The lawyers handle all that is legal in nature; the preparations of Motions, contracts, etc. Most importantly, you have a privilege with lawyers that you do not with a Trustee. They will be able to plead in Court on your behalf. A restructuring professional on the other hand, helps guide you through the maze of the commercial business aspect of the restructuring process.

The Restructuring professional is the expert in insolvency matters and is the only licensed professional to handle these type of matters.

This can involve developing the 13-week cash flow with you and making sure it behaves with the financial statements. A restructuring professional will help you communicate with the key players, banker, customers, suppliers and even employees.

Although, the debtor company will likely be the party who has retained our services, Trustees are bound to act in a dual capacity, respecting the rights and interests of both the creditor and debtor.

The lawyer and Trustee / Restructuring Professional work together to ensure you have the proper tools and information you need to make fully informed decisions which allow you to properly restructure the company. Think of the two parties as a tag team to your restructuring well- being and overall financial health.

Both have a role to play and although there might be some overlap, both have distinct roles and should complement each other well.

If your business is struggling with debt, it’s important to develop solution orientated frameworks and customized strategies which are aligned with your objectives as you work to navigate from uncertainty, to success.