When the Director of Corporate Enforcement calls.

The importance of working your Business Plan.

All the predictions are that we are heading for a tsunami of business closures in the next year to 18 months. Businesses closing through no fault other than Covid19 has changed the market and we were unable to adapt fast enough before our funds ran dry.

Not only is there personal devastation on staff and owners on losing jobs, savings, even family homes when a business closes, there is also, for organisation owners, the worry of subsequent investigation into the running of the business from liquidators and officers of the ODCE (Office of the Director of Corporate Enforcement).

Did we trade while insolvent?

Did we do everything legally in the time before closure?

Did we take too high risks?

All these questions and more will need to be answered at a time of mourning for your business and you are ill-prepared to face the ODCE officers.

“Nothing to worry about”….OH yeah!!

Of course, the ODCE state that there will be nothing to worry about in a case where the available evidence clearly demonstrates that a company director has acted honestly and responsibly in the conduct of a company’s affairs. But how do you prove it?

The questions now for all company directors are:

• Are you satisfied with the adequacy of the processes and procedures for monitoring the company’s financial position on an ongoing basis?
• What steps were taken to reduce costs and/or to restructure the business.
• Did you seek professional advice?
• The basis on which you formed the view that the company could trade out of its difficulties.
• The length of time that trading continued after it had become apparent, or should have been apparent, that the company was insolvent.

These questions can be satisfactorily answered through the workings of the Business Plan over the final period of trading.

Do you have a Business Plan? Are you working your Business Plan?

With a Business Plan we can see Actual versus Budget, we see negative changes and actions taken to address them.

Without a ‘worked’ Business Plan the answers will tend to be too vague for the ODCE, who will forensically examine the entrails of the business, which might lead to harsh insolvency questions – answers to which may be unverifiable by hard evidence, usually contained in business plan workings. 

I strongly advise all businesses to work their Business plan and note all decisions and actions taken to manage the business. This will go a long way to satisfy liquidators, creditors and the ODCE that directors acted honestly and responsibly prior to a business closure.

If you don’t have a Business Plan……………..get one………… and work it.

Mark Fielding. Business Adviser. 087 2519675. [email protected]