Partner Matt Lee was quoted in the BizTimes article, “When is it time to file for bankruptcy?” about when and why bankruptcy may be an appropriate option for businesses facing financial pressures due to the ongoing pandemic.
Lee told BizTimes that bankruptcy bares one’s business to the world. “Everything you do has to be approved by the court,” he added. “It’s not fun, it’s very expensive, it’s very time consuming and in addition to trying to run your company, basically your entire upper management and a decent part of your middle management is going to have a second job complying with requests and information needs and disclosure requirements brought about by the bankruptcy code and the bankruptcy rules.”
Businesses are well advised to seek legal counsel for the exact timing of when and how to file. A café or other small business with an aging owner might be better positioned for a Chapter 7 liquidation while a company run by an entrepreneur with decades to go before retirement might need a Chapter 11 reorganization. Lee said it is important to identify an end goal, which could be to reorganize, sell the business as a going concern, liquidate assets in an orderly fashion or simply stop everything right now.
Businesses also need to be creative and think outside the box. “You have to be willing to have uncomfortable conversations with your existing relationships,” he said, noting banks, landlords and creditors expect to be paid. “If you’re in this position, obviously something isn’t working.”
The second area of preparation comes ahead of an actual filing. Lee said it is important to have a consistent, honest and hopeful messaging campaign for employees to understand where the company is headed.
“Without your people, you’re never going to recover,” he said.