Welcome to our summer edition of the EACTP. It was
planned to publish this newsletter in conjunction with the TMA Europe Madrid conference which unfortunately has had to be postponed. It will now be replaced with a video based conference to be held on September 17th and 18th. EACTP will have a session at the conference to promote the value of CTP certification and training.

These are difficult times for people everywhere with a significant impact on family life, business and the world economy but they also present a number of interesting challenges which turnaround professionals are well qualified to respond to. In this edition we are highlighting some opportunities and trends not only to the Covid-19 response of various governments most of whom have reacted speedily and sensibly in providing liquidity, insolvency trigger deferrals and short term relief from directors’ liabilities from “wrongful trading” but in legislation changes and how that will affect turnaround practitioners. All this at a time when EACTP continues to move forward on finalizing its cooperation agreement with Leiden University to introduce on line learning for young professionals and an exam only entry for European CTP’s. We hope to be able to make formal announcements on this and its timing before the TMA
Europe conference.

One of Leiden University’s staff who will be working with EACTP as faculty has written for Harvard Law Review on Covid-19 measures taken by various governments. His article is attached as is an article from Volker Beissenhertz on Germany’s response to Covid-19 induced problems. I have also included in this edition an article reprinted from Global Turnaround written by Matthew Quade on the practical aspects of turnaround management that helped a manufacturing client to keep producing whilst other companies were perhaps overreacting to lockdown. It demonstrates how pragmatism and common sense, basis hallmarks of turnaround practitioners, can help
clients navigate through the myths and perceptions often spun by journalists and politicians. As Rudyard Kipling wrote;

“If you can keep your head when all about you are losing theirs … Yours is the earth.. and you’ll be a man, my son.”

Also included is another reprint from Global Turnaround on the role of a CRO. “Is this the time for the CRO?” Richard Thomson asks. I have been approached by the Editor to respond to the article for the June edition and I will certainly both endorse Richard’s sentiments and add perspective from a CTP’s point of view of the benefits of operating turnaround ahead of balance sheet restructuring as the real basis of turnaround management.

And finally and of particular importance to UK practitioners is an article on the long awaited change to UK insolvency law to incorporate a pre insolvency moratorium. This has variously been described by leading UK lawyers as “the most significant change to UK Insolvency law in twenty years” and from a CTP viewpoint “a reorganization and debtor friendly legislation and not a balance sheet restructuring tool” . It is too early to comment with any real authority on all its ramifications for turnaround professionals but first instincts from most experienced professionals are that although the moratorium requires an Insolvency Practitioner as monitor in the short period ( 40 working days) before creditor approval of the plan, the requirement for a reorganization plan which in the time constraints will need to be done before the moratorium commences, and the need for a judge to opine on “fair and equitable” before acceptance will provide much opportunity for pre moratorium operational change for which CTP’s are best placed to provide. It will certainly have a major impact on how the SME sector reacts to distress in UK once the Covid-19 temporary measures have worked through the system. It is likely that the need for young professionals to equip themselves with turnaround skills will become increasingly important which comes at a propitious time for EACTP’s progression to training and examination success as a measure of professional capability. 

It is not by accident that the legislation has been rushed through by the UK Government under pressure from practitioners. It contains sections on Covid-19 temporary reliefs but UK professionals have long been wary of developments in The Netherlands on the new Dutch insolvency regime which is reported to include mechanisms similar to an English Law Scheme of Arrangement (SOA). There is genuine concern that London will be under threat as the “go to” European restructuring centre. This new UK law has certain similarities with the SOA but is much more flexible particularly for SME’s. It also is open to forum shopping into UK with the “sufficient connection” test available for non UK companies to use as with the SOA. How this will stand the eventual UK departure from the UK and its availability for EU member state companies is an open point. Interesting times indeed!!

On a final point I though it timely to draw attention to a well written booklet from the UK’s Institute for Turnaround which can be found on their website and downloaded. It is a document designed to educate management and financial professionals in the benefits of turnaround ahead on reorganization in insolvency and as such is a worthy document.

A more technical booklet on the processes which was written partly by myself some years ago for the UK Institute of Chartered Accountants is also available for download here.

Both documents are useful tools to educate prospective client management.

2021 may be the year of the CRO and the turnaround manager. Let’s hope so.

Stay safe and stay well.