Are you a director of a company in financial distress? If yes, how many of these apply to you personally:

Stressed; Worried; Nervous; Tense; Depressed; Insomnia (in particular the 3 a.m. wake-up where you can’t stop rehashing your business problems!!).

Well you are not alone in having these feelings. Have a look at this research on the Negative Health Effects of Financial Stress.

When a company is in financial distress a director’s decision making is often flawed because a range of emotions come into play. What you need is informed, logical advice from an expert experienced in distressed financial situations. In many cases our only role is to be a sounding board for directors to reinforce their decisions or redirect them to a more appropriate path – that advice is free. So why not CALL NOW for CONFIDENTIAL FREE ADVICE and lift some of the burden from your shoulders.

If you want some tips on dealing with the stress carrying over to your personal life, read below on the following topics:

  • Negative Health Effects
  • Avoid Personal Liability
  • Not Letting People Down!
  • Complying With the Law

At Restructuring Works we are experienced in dealing with companies in financial distress and can immediately lift some of the burden from your shoulders. Contact us now for CONFIDENTIAL FREE ADVICE on your options.

NEGATIVE HEALTH EFFECTS

Are you stressed, worried, nervous, tense, depressed or suffering from insomnia?

Well you are not alone in having these feelings. Have a look at the research below.

If you are worried about your company’s financial position there is no substitute to speaking with an expert in the field. Our advisors have years of experience in dealing with companies in financial distress. Why not CALL US NOW for CONFIDENTIAL FREE ADVICE on your options.

In 2005 a study was done in America to identify the health effects of financial stress. The study explored the specific health effects associated with financial distress. Respondents were asked to indicate if they felt that their health had been affected by their financial problems and, if they answered yes, to explain how. The frequencies for each categorised response are reported in the Table below. The total adds up to more than 100% because up to three health effects per respondent were recorded from their open-ended responses.

Health Effect of Financial Problems Frequency (Percentage)
Stress/stressed out 613 (46.3%)
Worry, nerves, tension, anxiety, pressure 157 (11.9%)
Depression/depressed 132 (10.0%)
Insomnia and sleep disorders/problems 122 (9.2%)
Headaches/migraines 96 (7.3%)
High blood pressure/hypertension 95 (7.2%)
Stomach/abdominal/digestive problems 38 (2.9%)
Other aches and pains (e.g., back, chest) 16 (1.2%)
Ulcers or possible ulcers 13 (1.0%)
Appetite disorders and weight gain or loss 46 (3.5%)
Fatigue and feeling tired/weak 14 (1.1%)
Drug, alcohol, or cigarette use 4 (.3%)
General or other sicknesses 85 (6.4%)
Unable to afford or access health care services and exams 8 (.6%)
Can’t afford or don’t follow recommended health maintenance practices 22 (1.7%)
Other responses 111 (8.4%)

The study concluded that:

“The results indicate that there are a variety of perceived impacts of financial distress upon mental and physical health. Intuitively, it makes sense that poor health and financial problems are associated. Financial problems, such as overextended credit, are one of many life events that can cause people to experience the physical manifestations of stress (e.g., insomnia, migraines, anxiety) that are associated with many health problems and/or to cut back on recommended screening, prevention, and health maintenance activities. Indeed, stress was identified as a health effect of financial problems by almost half of the survey respondents who reported their personal finances affected their health (613/1,434 = 46.3%). Conversely, poor health can result in increased medical expenses, reduced productivity and earnings, and other negative financial effects that increase debt and drain household wealth.”

Source: Negative Health Effects of Financial Stress, Consumer Interests Annual Volume 51, 2005

AVOID PERSONAL LIABILITY

If you are not careful, you can get into the situation of being personally liable for your company’s debts.

It is a perfectly reasonable business objective to keep your business interests separate from your personal interests.   The whole concept of a limited liability company has this as its premise.  However, many creditors will use their commercial power to bring your personal assets into the equation.  In particular, the bank will seek personal guarantees from directors wherever they can as will many lessors and some powerful trade creditors.

The principle is even more important if you are a director of a company in financial distress.  Creditors will try and obtain your personal guarantee whenever possible – but we believe you should do so in only exceptional circumstances.

Before you make any new commitments in your personal capacity we strongly recommend you CALL US NOW for CONFIDENTIAL FREE ADVICE. It may be the right thing to do, or not!

Another consideration is that when a company is in financial distress, your duty of care can easily extend to new creditors by operation of law.  For example see our page on Trading Whilst Insolvent.  The area of personal liability becomes a bit of a mine field in distressed situations and you should CALL US NOW FOR FREE ADVICE.

NOT LETTING PEOPLE DOWN!

Did you click through to this page because one of your main concerns is not letting people down?

This feeling of obligation is something that affects most directors we speak to.  It is a perfectly reasonably view. We commonly find that directors will mislead employees and creditors on the prospects for their business, not with the intent of misleading those people, but rather a desire not to let them down.

So whilst it is an admirable thing to consider, striving not to let people down can lead to flawed reasoning. Your focus should be on an honest assessment of a company’s viability and it’s options gong forward.

If you need an independent view on your business prospects why not CALL US NOW for CONFIDENTIAL FREE ADVICE.

COMPLYING WITH THE LAW

In our experience, very few directors set out to break the law or to trade a business into insolvency. And yet it is common for a director of a company in financial distress to go close to or cross the line.

Why is that the case?

Most directors we deal with have a strong desire to comply with the law.  The difficulty faced by directors when a company is in financial distress is that a whole new raft of laws is introduced and the director will not know those laws.  Most importantly, directors will be unaware of the requirement to consider the position of creditors.  But if you do not know what the fiduciary duties of a director are or what transactions you may or may not undertake when insolvent – how can you comply?

Also the stresses of running a company in financial distress are high. That stress will often lead to flawed reasoning and poor decision making.

If you would like a sounding board regarding the issues you face, CALL US NOW for CONFIDENTIAL FREE ADVICE.

If you’d like to read more, take a look at our page outlining key Legal Issues for Directors then call us.