Commercial insolvencies are on the rise with expectations to continually increase in the near term due to a combination of higher interest rates, supply chain disruption, and escalated commodity costs. Any business – whether functioning as a creditor, supplier, customer, or another stakeholder – faces the likelihood of being impacted by formal insolvency proceedings.
The pressing nature of this issue necessitates the need for understanding and strategizing in the context of both newly initiated and ongoing proceedings. Herein, we offer six tips for general counsel who may be navigating such insolvency proceedings:
- Knowledge is power. Being well-informed about the legal and practical aspects of insolvency proceedings will give your company a strategic advantage.
- Be proactive. Keeping a watertight record of all transactions and engagements with entities on the brink of insolvency may safeguard the business from potential fallout.
- Seek expert assistance. Lawyers specializing in insolvency can offer valuable guidance and help predict implications of impending insolvency proceedings.
- Communicate effectively. Maintain an open and honest dialogue with the relevant insolvent party, and, if applicable, with insolvency practitioners.
- Collaboration can be key. If multiple creditors are affected by the same insolvency, joining forces to present a united front may yield advantageous outcomes.
- Evaluate and re-evaluate. Since insolvency scenarios can be fluid, routinely reassess your strategy to ensure that your business interests continue to be adequately protected.
Legal professionals working in the corporate sector need to comprehend that an anticipated rise in commercial insolvencies might, directly or indirectly, impact their business. Through the provision of detailed insights, the guide from Blake, Cassels & Graydon LLP provides useful tips to strengthen corporate strategies related to insolvency proceedings and outlines important factors in managing third-party insolvency risks.