DON’T PANIC: IMAGINE THE FUTURE YOU WANT
You need to imagine what you want your company to look like when you get through this
process. This is not meant to be a new-age visualization technique, but rather a tool to
develop the end-goal of where you will be when the restructuring effort will be completed.
Don't focus only on the balance sheet issues, but also on what your company will be able
to do when you get through this restructuring. This process will have two phases: the
formal front-end and the rebuilding plan afterwards. It is important that you have a clear objective that will allow
you to sell the idea of your restructured business to your creditors and all the stakeholders.
WHEN TO DO IT
The law states that any person who owes over $1,000 and cannot pay their debts as they become due is
insolvent. It is only an “insolvent” person that can seek the protection of the courts from their creditors. There
are other elements to this definition in the Bankruptcy and Insolvency Act, but you will know when it is
happening to you. From a cash-flow point of view, trigerring the creditor protection process should be done
when you have the greatest war-chest with which to fight the battle. You will need funds to continue operating
your business and to pay for the professionals involved.
The funds in your possession, be they accounts receivable you will collect, proceeds of asset sales, proceeds
of any last minute financing for such an operation, all have to be planned for to provide you the widest room to
manoeuver.
Timing is everything. If you wait too long you may not have the ammunition to accomplish your goal. Once you
begin, time is of the essence.
DEVELOP YOUR PLAN
You have tools available to you and need to understand how to use them.
When you have exhausted your ability to continue negotiating with your creditors, the law provides for two key
alternatives:
1. A proposal under the Bankruptcy and Insolvency Act.
2. A proposal under the Companies Creditors Arrangements Act.
There are technical aspects to each of these tools, but the essence remains the same:
First, the law gives you some peace and quiet: there is an immediate stay of proceedings. That means that if
suppliers are suing you, or even petitioning your company into bankruptcy, everything is suspended. You can
get the necessary time to organize your affairs and make an orderly proposal to creditors.
The debtor company will get an initial stay for 30 days and you will most probably be able to easily extend it for
an additional 45- 60 days in all. Additional delay may be possible, but you will have to make a proposal to
creditors by then.
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The CEO’s Guide to Creditor Protection
