Tens of thousands of businesses to fail in 2021

How Examinership can save your business

Liquidators too quick to liquidate

‘Tens of thousands of businesses are going to fail this year’, according to Baker Tilly Managing Partner, Neil Hughes. Speaking on Episode 16 of the That Great Business Show, Neil was forthright in his views that the examinership process is massively underutilised in Ireland, a process that could save many businesses and the jobs they bring with them. He feels that potentially viable businesses are too quickly put into liquidation rather than being given a fighting chance via the examinership process. He argues that every business that is currently under pressure should talk to their advisors immediately to understand the examinership process (he explains it succinctly on the podcast) as it may well be a lifeline for ailing or failing companies.

The shame

Neil, who has overseen over 300 examinerships during this time with Baker Tilly, says in his experience that men are less likely to face up to their business realities than women. Men internalise what’s happening, feeling some sense of shame about a situation that so many others are going through and that most likely has been brought on by the pandemic. He points out that in Ireland just 2% of failing businesses go through the examinership process, whilst in the USA, where restructuring is accepted as part of the normal business process, that number is 27%, or 14 times higher than in Ireland.

The Examiner takes the flack

Often, when a business is going under, it is understandably just too much for the business owner, who most likely have tried their level best to keep the doors open and the business on track. When it’s all failing though, it’s very hard to face creditors who most likely are in for a severe cut in what they are owed. Naturally, business owners want to run away and hide. However that doesn’t make the issue go away. What we learn from Neil though, is that part of the examiner’s role is to take the pain away from the business owner, frequently to organise and run creditors meetings with the failing company owners deliberately asked not to be there – so it’s the examiner who takes in the neck, if that’s how the meeting goes. But, Neil points out that these meetings, where companies have been correctly run and have just failed due to circumstances such as Covid, actually can be cathartic for the owners when they see the amount of actual goodwill, empathy and understanding that creditors can have. Of courses they’re sore at losing money but they also realise that someone is losing his or her business.

100 days of solitude

The examinership process used to provide 100 days to the examiner to see what they could do to save as much of the business as possible. That length has now been extended to 150 days, time when the examiner deals with the creditors, lenders, bankers, Revenue etc, away from the directors of the business. The business owners are free during this time to do what they do best, to run the business. The examiner also takes on board the concerns of those people who normally, as he puts it, ‘don’t have a voice’, the employees and he argues that if this were done as the norm (unlike in liquidations) that it could avoid contentious situations as seen with the closure of Debenhams Ireland.

Next move 

‘Talk to your advisers immediately’ is the simply (and timely) advice that Neil has for anyone worried about their business. The sooner that issues affecting the business are faced up to, the sooner they can be resolved, and all is not always lost when the examinership process is complete.