Troubled Companies

The following text has been prepared by Arthur Lipper III for British Far East Holdings Ltd. and is intended to be part of a book, “Troubled Companies”. No reproduction or publication of these writings is authorized, except with written consent of the author and owner.

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Chapter 4

What to Say to Bankers, Prospective Investors, Employees, Customers and Suppliers - And When

HELP! is what to say to those on whom you and your company depend when you have determined your company to be troubled, probably for lack of resources.

It is not important who is responsible for the company’s not having the resources necessary to achieve its objectives. It is not even vital to know or disclose why the problems were not discovered or discerned earlier. It is vital to know what those with whom you are dealing can and cannot do to help. That which the representative of the troubled company must do is describe, in a reasoned manner the specific areas of assistance reasonably required of the various players and convince them as to why it is in their best or better interest to provide the assistance rather than to withhold it.

Although some of the law and regulation regarding the requirement for disclosure are complex the underlying premise and justification is simple. Therefore it is easy to know what the right thing to do is. The right thing to do is to inform the parties with whom you are dealing exactly that which, were you in their position, you’d like to know relevant to the action being sought and the status of the company. You really should be prepared to allow someone to have sufficient information so that they can make an assessment of the risk/reward factors which would naturally impact their decision making. Do unto others, etc.

Managers and others representing and acting on behalf of troubled companies accrue personal liability if they are other than truthful and forthcoming in persuading those with whom they are dealing to accept risk without adequate disclosure. Only providing accurate answers if asked the insightful and precise question is too frequently the approach of those operating under pressure - usually to the detriment of all concerned.

It will be helpful if you are thoroughly familiar with the stories of corporate turn arounds relating to other companies, if possible similar in some way to your company, to buttress your quest for assistance. Those who have had confidence in and assisted troubled companies which have recovered and prospered have made fortunes - and those with whom you are dealing or attempting to deal could be similarly fortunate and able to benefit from your company’s problems.

Everyone likes to be associated with a winner and the risk/reward ratio for participants in turn arounds is frequently better than in companies before problems arise and when there is an abundance of positive and frequently inflated expectation present.

As in any other sale, the customer benefit must be discerned and conveyed as all act on the basis of perceived self interest.

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Reader comments and suggestions as to specific examples are welcome. All submissions will become the property of British Far East Holdings Ltd. with our appreciation, but without compensation to the party making the submission.

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