Oddly at the moment I find myself in control of a building company somewhat smaller than the one that’s drawing all the headlines.  I have been in the role only a matter of weeks prior to the more notable one.  So I was somewhat taken aback when I saw the Administrators ad offering the larger business for sale, etc. so soon after their appointment.

In our matter we are still very much focused on operational matters involved in completing jobs, ensuring appropriate funding of trading, suppliers, and the like and preserving the value of the company for the ultimate beneficiaries.  After that will come some analysis relating to the possibilities of some form of proposal and/or a sale; if it’s not still operating then there’s normally not really much to sell.

It was later that I was to read of the 4 months of paid pre-investigation and advice that the big firm, government advising, Administrators are permitted.  For the smaller businesses and practices in this country it is necessary to do this after the appointment or only do very little and what you do do, you must do for free.  The distinction was even made specifically by the administrators concerned in the only legal case that has touched on this area.

There has been some wonderful commentary on this aspect in both the AFR and Peter Gosnell’s Insolvency News Online about the similarities between the two matters.

However me thinks, the situation in this particular case may well be just a little bit more difficult to as easily explain away.  I remember many years ago when I was working for a larger firm I was having a chat with someone from the MICD (Management Information Consulting Division) about a matter that they were proposing on.  The individual was pointing out that they had found a major cause of the problem being the financial controller, who was always negative and repeatedly focused on asking the question “where’s the money coming from for next week’s wages?”  I asked politely if it was possible for me to meet with the Financial Controller.  It was strictly prohibited by the Partner leading the engagement; Divisional targets after all. The day the MICD team went in to pitch their plan, which had had a significant investment in time thrown at it, they were stunned to be met by the receivers coming out of the Board meeting following their appointment by the organisations banker!  There ended the plan.

In this case the situation is littered with a plethora of advisers working in the same environment, at the same time, all operating concurrently on opposing courses of action.  It is almost incomprehensible that people conducting proper investigations could be so unaware of each other’s existence and purpose.   This is particularly so given the very public nature of the capital raising, what was the insolvency adviser’s responsibility to publicly question the appropriateness of that act.  Lots of legal fees will no doubt one day be spent to potentially answer that question.

As a comparison though, one of the first questions smaller firms ask is “who else are you getting information from and what have they suggested?”  But then I suspect we tend to be more vigilant of our surroundings.

What it certainly shows though is that the laws we have for rescuing failing businesses in this country seem to be far more focused on legal process and procedure rather than practical, cost effective solutions conducted within an effective legislated environment resulting in more expedient and greater returns for creditors and relevant parties.  No doubt this matter, like many others, will produce a great raft of work, over many years that the creditors will ultimately pay for.  But potentially for what ultimate benefit?

It will be fascinating to see the stance that the regulators take as this unfolds.  The papers have already targeted the directors and the auditors, but I suspect there will be many others whose involvement and contribution will become more visible and more relevant as the process unfolds.

In the words of the King of Siam from that famous movie; “Is a puzzlement?”