I read a story today about a government minister being unable to find minutes of a meeting which made me think of a habitual issue we see on formal restructuring assignments - directors not recording their decisions. This is all the more important in the current climate where there is significant scope to rescue a business and avoid formal insolvency:
- As HMRC remain supportive of businesses, enforcement activity is still relatively muted;
- There appears to be stakeholder acceptance of the supply chain, inflationary and staffing challenges facing business and a willingness to work through problems;
- Banks continue to be supportive of viable clients with hostile Administrator appointments still rare;
- There is still huge liquidity in the lending sector and great appetite to lend;
- The new Code of Practice and landlord/tenant arbitration Bill will facilitate important discussions around lease arrears to preserve business.
All of the above creates a business environment ripe for Boards to attempt to trade out from often technically insolvent positions. With the right advice and stakeholder engagement, this may prove to be the right decision. In my experience, contemporaneous documenting of decision-making is often forgotten.
Through the prism of a formal insolvency, decisions taken by a Board some weeks and months prior to the process, may seem reckless or ill-founded. It is therefore vital that directors ensure they record their meetings/decisions taken and capture the information available to them at the time upon which they acted. If the rescue is unsuccessful and a formal insolvency commences, the availability of contemporaneous minutes which set out their reasons for continuing to trade at the time can go a long way to mitigating a Board liability.
In short, it is so easy and quick to complete Board minutes which will be invaluable to justify decision-making if the business fails.
Minister says she can't find minutes