Your Baby Didn’t Die

I’m going to do something that I don’t usually do – I’m going to try and make the most of the fact that I’ve spent the last half decade working for a firm that specializes in a unique field of accountancy called “insolvency.” The field that I’ve worked in is in a curious place between accountancy (liquidator’s and trustees in bankruptcy are mostly trained accountants), law (most of our work involves crossing a legal minefield) and management (the process of liquidation involves management skills of having to collect debts, pacify angry creditors, deal with frustrated landlords, firing of employees – many of who may not have been paid for some time, disposing of assets and so on.). In a funny way, my day job in the insolvency trade has given me many of the skills that my side hustle of promoting a start-up accelerator requires.

One of the main reasons why I don’t blog directly about what I do during the day is because much of what happens in the business involves legal. However, wherever possible, I do try to share my experiences of dealing with people in certain situations, particularly the sad and depressing ones and I guess one of the key topics that someone who has a toe-hole in this business should address is the emotional topic of corporate insolvency and bankruptcy.

Many of us were brought up with the notion that business is entirely about making money. The concept of business is simple enough – you buy low, sell high and pocket the difference. However, as the act of buying and selling involves human interaction, the concept of business is complicated by human emotion. If you hang around business people long enough, you’ll realise that business is not just about money – it’s about something more important – the human being.

In my five-years of being in the insolvency, I’ve seen how a business becomes part of a person. I remember liquidating a company set up by an Englishman who had found himself on the wrong end of a law suit. Throughout the process he kept repeating that we were taking away 27-years of his life and it took several reminders from us and his friend, who was an Australian lawyer that he had no company left.

The man had a point. The business he had started and built up from the ground was his life’s work. A few of the people who were collecting their goods from the Company actually remarked that the man was a pioneer in his field and was effectively an industry unto himself.

However, the fact remained, the court order against him had been issued and he was unable to come to an agreeable settlement with his petitioning creditor. While there was a semblance of a functioning business, we had the power to stop him from functioning and that was that.

While it was easy to sympathise with the man, the fact of the matter was he had not made payment on a judgement debt and the creditor had every right to wind him up. A good part of my job was to handle him and to keep reminding him that he and his business were contrary to what he was feeling separate entities.  The business had died but he was alive and well enough.

Too many business people forget that part of the reason they set up a “company” in the first place is because a company is a separate legal entity from the person. While a company may contain a person and more often than not in Asia (I’ve been involved in liquidating companies as old if not older than me) a family’s life’s work, the company is not in any biological sense a living being.

If a human being dies, that’s it. If a company dies, there is a possibility that the business it was running can be revived at some stage or another.

While this may seem self-serving (considering its my main stay to get liquidation and restructuring projects for my employer), business people need to remember that there is no shame in calling in professionals to help them restructure or in many cases to shut the company down. Companies, no matter how much time you might have spent building them up, are not living beings. One should not hold onto a company for emotional and personal reasons. When the company cannot survive, it is better to let go. There are laws relating to “insolvent trading” or situations where the directors are clearly aware that the company is in obvious financial difficulties and cannot be saved. I cannot stress enough that the company is not a living being where you have a moral obligation to look after.

The same point leads to the matter of personal bankruptcy. Like corporate insolvency, bankruptcy is an issue that many try to avoid. This is particularly true in Asia, where the concept of “Face” is all important (rough translation is reputation but the meanings of “face” are often deeper). Nobody, particularly someone who is known to be successful wants to confront.

However, the reality is that many of today’s lenders insist on personal guarantees (PGs) before they make loans of a certain quantum. There are situations where bosses have pledged personal properties to the banks and in some cases, even the landlords (one of the most powerful group in Singapore’s economy) insist on personal guarantees before leasing out a place.

When this happens and the company goes down, one can expect banks and landlords to call on their PGs. In this case, one has to be clear headed. If you owe in the millions and have no prospect of ever earning that type of money, bankruptcy is the sensible option.  I had to explain to someone recently that it was better to pay thousands on personal debts of millions. While bankruptcy does impose restrictions on things like overseas travel, it also allows one breathing space to reoganise one’s financial situation. A bankrupt is perfectly capable of earning a living. Bankrupts are also entitled to certain government assistance programs like legal aid.

Having said that, bankruptcy should not and does not protect one from criminal laws. While it’s pointless to sue a bankrupt (what can you collect), anyone thinking that bankruptcy protects them from fraud charges is wrong. You can do jail time for things like fraud.

Thanks to Covid-19, the world economy is in a bad shape. The prospect of business failure and a collapse in one’s personal financial situation is an increasing reality for many. Insolvency and bankruptcy are likely prospects. While neither are pleasant things to go through, they are not medical issues that involve your personal well being. If you have to go through them, use them as situations where you can figure out how to rebuild when things improve. Work with your liquidators or bankruptcy trustees. You can still make a living and you can always rebuild even when dealing with business failure or personal bankruptcy.