You may have received an email about this earlier in the week, but if not, read on...
The heading is a quote taken from a story about selling that Bill was told nearly 40 years ago. We think that the Moratorium added to the IP’s toolkit at the end of June could be a bit like that story. We’ve finished drafting a pack to help you use it, so we’ll take a bit of time to explain the story, how it may relate to the Moratorium, and the document pack. We think you’ll find the 5 minutes it takes to read through it worthwhile, even if you don’t agree with our conclusion.
The story
There was once a new sales executive, working for a major shoe brand (Bill was told about it at Clarks, when he worked in their Peter Lord branded shoe shops, if anyone remembers them). The sales executive was sent to a remote island to sell shoes but came back despondent after only a few days and complained to his area manager that he could not sell anything, because, “Nobody there wears shoes”. The area manager told him to look at it another way. He explained that if nobody there wears shoes, then everyone there needs shoes. The sales executive just had to find the right ones to fit their needs.
The Moratorium
We see similarities between that story and the Moratorium at the moment. We assume that you have read the high level summaries that everyone seems to have issued and some of you may have delved into the detail or attended the odd virtual CPD event on the topic. You may have heard of the big firm that is rumoured to have told its staff not to take Moratorium appointments because they are too risky. You may well be struggling with the idea of supervising a debtor-in-possession insolvency solution where you have to avoid giving advice for fear of becoming a shadow director, and where your involvement may prevent you from taking the appointment in any subsequent CVA or ADM if the ethical threats get too significant. If you are, then you may well be looking at the Moratorium the wrong way, and you may be missing an open goal of an opportunity.
The Monitor’s duty under the Moratorium is potentially pretty simple and, if done sensibly, relatively risk-free. The Monitor first has to check that the company is eligible for a Moratorium and it is likely that it would survive. Eligibility is set out early in the new section A of the Act and although “likely” sounds like a fairly high hurdle, there is judicial commentary that it means “more likely than not” which puts a slightly different slant on it. The Monitor then has to monitor the company during the Moratorium to confirm that it remains eligible and it is still likely that it would survive. The Monitor can rely on information provided by the company, but should use their professional judgement and act as an officer of the Court. If you recklessly follow the director and their advising accountants and lawyers without exercising your professional scepticism, you will be at risk. If you support a Moratorium where the company really stands no chance of survival and a pre-pack, a low value CVA, or even a CVL or CWU is inevitable, then you will be at risk. At the other extreme, if you take a fee to give your opinion and then withdraw it at the first opportunity and cripple a viable business, you will be at risk. However, if you act professionally, exercise your judgement, document your thought processes and reasoning, supported by evidence given to you by the company that you have strength tested for reasonableness, you will avoid most of the risk. You may be challenged at Court on occasion, but insolvency has always been contentious and as long as you have been professional, have contemporaneous file notes to document every decision, and acted as an officer of the Court, the risk is minimised.
If your biggest worry about being a Monitor is that you may end up being treated as a shadow director, then you are approaching it from the wrong place. The Moratorium is not a way of buying time while you generate fees from advising the company and secure a lucrative subsequent insolvency appointment. It is intended to be a breathing space to allow a viable company to survive. Your job is to check that it is more likely that not that it will survive. That may, on occasions, mean discussing matters with the directors and their advisors. In some cases, the best route to survival may be a CVA, or a purpose 3(a) ADM. If you have remained objective as Monitor, your ethical assessment is that you can seek the appointment, and the stakeholders agree, you may be able to assist with that process and take the appointment. Above all, however, you will be the Monitor at that time, and if it is no longer likely that the company will survive, possibly because you can only save some of the business through a pre-pack, or because the return on a CVA is really little better than liquidation, then you will have to act on that information and terminate the Moratorium. The directors may challenge you, but the termination should not be a surprise to them and, if your decision is properly documented and supported by your evidence, any challenge should fail anyway. We think that it is quite possible for you to act as Monitor, make that decision when it becomes clear that a pre-pack is the only likely option, then assist with the pre-pack and take the appointment, subject to ethical clearance and the support of stakeholders. While there will be cases where the stakeholders want fresh blood or impose a panel member as office holder, that is a situation you are familiar with and the Moratorium does not, in itself, provide a fresh hurdle.
Most of the arguments against taking an appointment as Monitor that we have heard to date run along the lines of “it would be easier to do an ADM/CVL/other insolvency process”. If the company is going to fail, then that is the correct solution. However, the Moratorium is not for companies that are going to fail. It is for companies that are likely to survive. It gives IPs, who still struggle with their old image of battlefield medics administering the coup de grace to the hopelessly wounded, a chance to work with clients that they don’t normally even see, let alone earn a fee from. It will give you a chance, especially during the coronavirus crisis, to work with successful businesses. You won’t earn your usual fees that reflect the risk and reward of dealing with failure and conflict. Instead, you will earn fees for monitoring a company’s eligibility and continued likelyhood of success. You are not giving up a big ADM or CVL fee, because the company is not suitable for one of those solutions. Instead, you are being given an opportunity to earn a fee for watching a successful company recover from a one-off global event. Some won’t make it, and there may be further opportunities once your duty as Monitor is over. However, others will survive, grateful to you for your supervision and, potentially, providing new contacts in future that may lead to more traditional business.
Our packs
There is a point to all of this for us as well. We didn’t do all of this work entirely out of the goodness of our hearts, so if you’ve learnt something from the stuff above, you could spare us one last minute. In less than 2 weeks since the Act became law, we have produced Moratorium document packs for both sole and joint office holders. They include a work programme to help with the process and supporting documentation to cover a wide range of possible scenarios. For clients to already subscribe to our document packs and updates, they are already available without charge. For anyone that would like access to our full set of document packs, including updates to September 2021, you can contact bill@complianceoncall.co.uk and get access to ADM, CVA, MVL, CVL, CWU, IVA, BKY and MOR for £5,000 plus VAT. If you just want the MOR pack and you are happy to do your own updates, we can send you the packs today for £3,000 plus VAT.
The MOR packs are based on our tried and tested document packs for the other case types, which are regularly used by over 150 IPs and their staff. They include basic IPS merge codes, but we would never claim that they are “IPS compatible”. Those who subscribe to all of the packs and updates will receive more documents or further refinements as the legislation and SIPs change, but even if you just buy the stand-alone pack, you will have an instant solution to help you access a whole new market.
In the same way that the sales executive had a great opportunity to sell to a community with no shoes, you have a great chance to open up a new market. Just because nobody has done a moratorium before and you have not dealt with successful companies before, it does not mean that you cannot sell your services. Grab your toolkit and get out there. Good luck!
The story
There was once a new sales executive, working for a major shoe brand (Bill was told about it at Clarks, when he worked in their Peter Lord branded shoe shops, if anyone remembers them). The sales executive was sent to a remote island to sell shoes but came back despondent after only a few days and complained to his area manager that he could not sell anything, because, “Nobody there wears shoes”. The area manager told him to look at it another way. He explained that if nobody there wears shoes, then everyone there needs shoes. The sales executive just had to find the right ones to fit their needs.
The Moratorium
We see similarities between that story and the Moratorium at the moment. We assume that you have read the high level summaries that everyone seems to have issued and some of you may have delved into the detail or attended the odd virtual CPD event on the topic. You may have heard of the big firm that is rumoured to have told its staff not to take Moratorium appointments because they are too risky. You may well be struggling with the idea of supervising a debtor-in-possession insolvency solution where you have to avoid giving advice for fear of becoming a shadow director, and where your involvement may prevent you from taking the appointment in any subsequent CVA or ADM if the ethical threats get too significant. If you are, then you may well be looking at the Moratorium the wrong way, and you may be missing an open goal of an opportunity.
The Monitor’s duty under the Moratorium is potentially pretty simple and, if done sensibly, relatively risk-free. The Monitor first has to check that the company is eligible for a Moratorium and it is likely that it would survive. Eligibility is set out early in the new section A of the Act and although “likely” sounds like a fairly high hurdle, there is judicial commentary that it means “more likely than not” which puts a slightly different slant on it. The Monitor then has to monitor the company during the Moratorium to confirm that it remains eligible and it is still likely that it would survive. The Monitor can rely on information provided by the company, but should use their professional judgement and act as an officer of the Court. If you recklessly follow the director and their advising accountants and lawyers without exercising your professional scepticism, you will be at risk. If you support a Moratorium where the company really stands no chance of survival and a pre-pack, a low value CVA, or even a CVL or CWU is inevitable, then you will be at risk. At the other extreme, if you take a fee to give your opinion and then withdraw it at the first opportunity and cripple a viable business, you will be at risk. However, if you act professionally, exercise your judgement, document your thought processes and reasoning, supported by evidence given to you by the company that you have strength tested for reasonableness, you will avoid most of the risk. You may be challenged at Court on occasion, but insolvency has always been contentious and as long as you have been professional, have contemporaneous file notes to document every decision, and acted as an officer of the Court, the risk is minimised.
If your biggest worry about being a Monitor is that you may end up being treated as a shadow director, then you are approaching it from the wrong place. The Moratorium is not a way of buying time while you generate fees from advising the company and secure a lucrative subsequent insolvency appointment. It is intended to be a breathing space to allow a viable company to survive. Your job is to check that it is more likely that not that it will survive. That may, on occasions, mean discussing matters with the directors and their advisors. In some cases, the best route to survival may be a CVA, or a purpose 3(a) ADM. If you have remained objective as Monitor, your ethical assessment is that you can seek the appointment, and the stakeholders agree, you may be able to assist with that process and take the appointment. Above all, however, you will be the Monitor at that time, and if it is no longer likely that the company will survive, possibly because you can only save some of the business through a pre-pack, or because the return on a CVA is really little better than liquidation, then you will have to act on that information and terminate the Moratorium. The directors may challenge you, but the termination should not be a surprise to them and, if your decision is properly documented and supported by your evidence, any challenge should fail anyway. We think that it is quite possible for you to act as Monitor, make that decision when it becomes clear that a pre-pack is the only likely option, then assist with the pre-pack and take the appointment, subject to ethical clearance and the support of stakeholders. While there will be cases where the stakeholders want fresh blood or impose a panel member as office holder, that is a situation you are familiar with and the Moratorium does not, in itself, provide a fresh hurdle.
Most of the arguments against taking an appointment as Monitor that we have heard to date run along the lines of “it would be easier to do an ADM/CVL/other insolvency process”. If the company is going to fail, then that is the correct solution. However, the Moratorium is not for companies that are going to fail. It is for companies that are likely to survive. It gives IPs, who still struggle with their old image of battlefield medics administering the coup de grace to the hopelessly wounded, a chance to work with clients that they don’t normally even see, let alone earn a fee from. It will give you a chance, especially during the coronavirus crisis, to work with successful businesses. You won’t earn your usual fees that reflect the risk and reward of dealing with failure and conflict. Instead, you will earn fees for monitoring a company’s eligibility and continued likelyhood of success. You are not giving up a big ADM or CVL fee, because the company is not suitable for one of those solutions. Instead, you are being given an opportunity to earn a fee for watching a successful company recover from a one-off global event. Some won’t make it, and there may be further opportunities once your duty as Monitor is over. However, others will survive, grateful to you for your supervision and, potentially, providing new contacts in future that may lead to more traditional business.
Our packs
There is a point to all of this for us as well. We didn’t do all of this work entirely out of the goodness of our hearts, so if you’ve learnt something from the stuff above, you could spare us one last minute. In less than 2 weeks since the Act became law, we have produced Moratorium document packs for both sole and joint office holders. They include a work programme to help with the process and supporting documentation to cover a wide range of possible scenarios. For clients to already subscribe to our document packs and updates, they are already available without charge. For anyone that would like access to our full set of document packs, including updates to September 2021, you can contact bill@complianceoncall.co.uk and get access to ADM, CVA, MVL, CVL, CWU, IVA, BKY and MOR for £5,000 plus VAT. If you just want the MOR pack and you are happy to do your own updates, we can send you the packs today for £3,000 plus VAT.
The MOR packs are based on our tried and tested document packs for the other case types, which are regularly used by over 150 IPs and their staff. They include basic IPS merge codes, but we would never claim that they are “IPS compatible”. Those who subscribe to all of the packs and updates will receive more documents or further refinements as the legislation and SIPs change, but even if you just buy the stand-alone pack, you will have an instant solution to help you access a whole new market.
In the same way that the sales executive had a great opportunity to sell to a community with no shoes, you have a great chance to open up a new market. Just because nobody has done a moratorium before and you have not dealt with successful companies before, it does not mean that you cannot sell your services. Grab your toolkit and get out there. Good luck!
