The way back to black: Saving a sinking company is tricky in a sea of divergent interests

BT ILLUSTRATION: BILLY KER

"Everything we do is to preserve and enhance value for different stakeholders. That process will require recognition of the various rights of the different stakeholders. It sometimes needs to balance various competing interests." - Baker Tilly Reid principal Tim Reid.The way back to black for financially struggling listed companies is more often than not a long and arduous one.

Industry professionals feel it is not so much that instances of wrongdoing are on the rise, but rather that regulators are adopting a more active stance and the regulatory regime has become stricter over the years. An SGX RegCo spokesperson offered this dismal statistic: Of the total 63 companies that have been suspended for 12 months or more, only eight eventually resumed trading, which works out to about 13 per cent.

"It does take a while before things settle down and the expectations get closer and closer and more aligned," says Mr Ong."It's a process which naturally starts far apart and takes time and effort to close." "In various emerging markets, the concept of a turnaround or restructuring is foreign, because the legal framework and the culture in those markets do not facilitate this. This may then result in a binary situation and makes it challenging for distressed corporates and creditors who want to see a positive and meaningful restructuring."

The recently revamped Companies Act now allows an automatic moratorium of 30 days to take place immediately upon filing of an application. This gives the company and its financial advisor time to further engage in discussions with its creditors, and to come up with a viable restructuring proposal. Liquidation is the final resort, tantamount to corporate bankruptcy. Assets are sold in fire sales, and money collected to repay creditors. The process can be lengthy, especially if there are lawsuits involved, or if the debtor company has many layers of subsidiaries, each of whom needs to be liquidated to repay its own group of creditors before the surplus can flow upwards to the parent.

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