Blog

16 October 2017

Business insolvency: breaking the taboo By Olivier Boutellis-Taft and Eleni Kanelli

       Failure is simply the opportunity to begin again, this time more intelligently (Henry Ford)

 

200,000 companies go bankrupt every year in Europe resulting in 1.7 million job losses. This is not surprising seeing the lack of EU-wide early stage restructuring options for companies in financial distress and mechanisms granting a second chance to entrepreneurs.

The fear of being ‘stigmatised’ as a “fail” keeps entrepreneurs away from seeking help. Most of the time an entrepreneur decides to reach out for experts’ assistance at a very late stage. Business culture across Europe remains based on the idea ‘once a failure, always a failure’ and this is something that needs to change.

There is no taboo in admitting financial distress or admitting an insolvency. Entrepreneurs need to take steps forward, without being held back by risks or bureaucratic obstacles. Modernising and simplifying business insolvency will contribute to recovering Europe’s economy .

Accountants can offer a helping hand to entrepreneurs and ensure that seeking help is not a taboo anymore.

 

How can accountants play a role in business restructuring & insolvency ?

Almost every business in Europe has a professional accountant. They can flag any financial problems encountered by entrepreneurs, monitor companies’ overall performance, and advise their client accordingly. Indeed, professional accountants have the right background, during restructuring, to ensure that:

  • any proposed business plan is feasible
  • the financial management remains appropriate
  • the proper decision-making is in place

Insolvency proceedings themselves can end up being very complicated. An insolvency practitioner – be it an accountant or another professional (depending on countries) – can assist the entrepreneur in going through this process in the best possible way.  Based on experience, an entrepreneur in financial distress, especially an SME, cannot easily cope with insolvency and restructuring procedures without help from an expert. An independent third party can contribute to better information sharing  when it comes to preparation of documents to be submitted to the court or cash flows during the period of ‘stay’ etc.

Entrepreneurs bear also their share of responsibility in this equation. They should approach on time the right professionals to ensure having access to appropriate advice. Conversely, an insolvency practitioner should receive the necessary training and obtain specialised knowledge. Poor advice or misguidance can be detrimental both for entrepreneurs but also for those involved with the business such as employees, creditors or suppliers.

Getting help from a professional accountant is a worthwhile investment knowing that such advice can save businesses from insolvency or provide an entrepreneur with a second chance. Losing the business altogether means much higher costs for the debtor and other affected parties, including the general interest.

 

Accountancy Europe stands for…
  1. entrepreneurs’access to appropriate and timely advice  
  2. less bureaucracy in insolvency proceedings 
  3. market’s economic benefits resulting from the EU Directive on insolvency, restructuring and second chance

Check our latest work to know more on how accountants can help with restructuring and insolvency proceedings and see which are our positions on the most contentious matters of the Directive.

With our latest event on 10 October, we took stock of European Commission’s and European Council’s work and debated on what the next steps to ensure a harmonised insolvency framework should be.

Related content

EventTrain the Advisor: Become an IP Expert for SMEs

16 December 2021

EventHow to build a credible green bond market

1 December 2021

Consultation responseEU Taxonomy and Article 8 Delegated Act implementation need clarity

17 November 2021

Consultation responseIASB’s Exposure Draft: Management Commentary and EFRAG’s Draft Comment Letter

15 November 2021

NewsTime to deliver on high quality sustainability reporting

12 November 2021

UpdateSME Update

5 November 2021

UpdateSustainability

4 November 2021

PublicationFAQs on sustainability information assurance

3 November 2021

Podcast There’s no creation like co-creation: sustainability reporting standards

28 October 2021

EventMembers’ Engagement Day

20 October 2021

EventEarly Warning Europe Day

28 September 2021

NewsReporting Beyond the Financials: Sustainability on the Books

24 September 2021

Consultation responseEC’s proposal of an EU standard for green bonds

22 September 2021

Team memberChara Georgiou

17 September 2021

UpdateSME Update

16 September 2021

UpdateSustainability

14 September 2021

Consultation responseEFRAG’s consultation paper – due process procedures for EU sustainability reporting standard-setting

14 September 2021

PublicationSMEs’ digital future

13 September 2021

Consultation responseEC’s consultation on fighting the use of shell entities and arrangements for tax purposes

31 August 2021

PublicationSustainable tax system: taxes and the environment

31 August 2021

Sign up for our newsletter

* indicates required
Would you like to subscribe to our newsletter?
On which topics would you like to receive news?