Danger: Look After Yourself In A Business Crisis
Managing Your Four Key Risks In A Turnaround - Part 1 Personal Risks
As a director or owner manager of a business facing difficulties, it is important to ensure that you manage your personal risks appropriately and these articles address how to approach this task by focusing on four key areas.
1 Your normal responsibilities
Even if you are in a crisis, you remain a director of a business that needs to comply with all its normal legal requirements. So, both the company and you will continue to carry all your normal responsibilities under whatever legislation applies to it. Health and safety and environmental legislation, as well as any industry or sector specific requirements such as licensing will continue to apply to the business irrespective of the degree of financial distress you are under. Similarly, the basics such as keeping accounts and tax records (and for directors, your statutory responsibilities under the Company's Act for filing accounts and completing an annual return)will also remain in place.
2 Abnormal risks in your normal responsibilities
Some of these can however become particularly acute when a business gets into difficulty.
One particular area to be aware of for example is employment law and its requirements for consultation, as in turning your business around you will undoubtedly need to make changes that relate to people, from how they do things and who does what, under which terms, through to who is still working for you at the end of the process. But employees have a wide ranges of rights under Employment Law in respect what changes can be made to working arrangements and the processes that need to be followed to introduce these. Failure to adhere to this legislation can leave you vulnerable to action through employment tribunals and potentially significant costs to your business. This is not something that arises specifically because the business is in difficulty. These are risks that any business runs when looking to change employee arrangements, but they are an area where firms in difficulty can become exceptionally vulnerable due to a desire to push through changes quickly.
3 Exceptional levels of personal pressure
There seem to be four basic fears that many of us share to varying degrees. The stress of dealing with a business in difficulty can bring these to the fore. So, if I fear one of these key concerns, then in a crisis, I can feel:
- Failure - I've failed personally because the business is in a mess
- Rejection - My customers aren't buying or are ungrateful because they don't value me and my products any more
- Instability and uncertainty - I am worrying all the time whether we are going to make it through or not
- Conflict - I am having to fight the bank and say no to creditors all the time
There are a few people who seem to absolutely thrive on seemingly impossible challenges (the blacker the better). Unless you are one of these, having your business get into difficulty is going to be a stressful, depressing, and difficult experience that is going to put a strain on you, your family, and your employees.
So these as valid appropriate reactions and emotions to have and you need to recognise them as such. After all, if you did not get upset about the fact that your business is in difficulty, what would that say about you and your commitment to it?
But in doing so you must also:
- prevent you from being overwhelmed by these feelings as they may stop you from taking action; and
- preserve your own mental health.
You are your business's most important resource when it comes to restoring it to health. If you don't do it, no one else is going to do so. The surest way to guarantee that your business will fail is for you to give up trying to save it because it is 'all too difficult', 'there is nothing you can do', or 'you just can't cope.'
A crisis will often lead to the owner feeling depressed or stressed (and the symptoms of excessive stress can also manifest themselves as a form of depression). If this is the case you should see your doctor to get professional help to get you through this period.
4 Insolvency specific risks
Finally, there are also specific 'insolvency' related risks to you as a director which can lead to potential personal liability and/or listing on the directors' disqualification register and these will be discussed in more detail in Part 2 of these articles, while Part 3 will cover the risk that you can be held personally liable for your company's arrears of PAYE.
Of course the information contained in an article like this can never be a full statement of the legal position as the relevant laws are complex and liable to change. This article can only therefore be a general guide as to the issues involved and as these can have serious implications you should always seek appropriate professional advice on your own particular circumstances before taking any action.
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