Financial distress can pose significant challenges for directors, especially when it begins to threaten the solvency of the business. In these situations, seeking insolvency advice for directors becomes crucial to understanding available options and protecting their position. Directors may face personal liability, regulatory pressures, and complex decision-making requirements. Engaging a Director's Advocate provides the guidance and strategic support needed to navigate these critical circumstances with confidence.
Director’s advocate understands that the role of insolvency practitioners (IPs) is a key part in the administrative management of financially distressed businesses. Their primary role depends on the type of engagement:
- Voluntary Administrations - Administer the business in place of the directors.
- Small Business Restructures - Present a report to the creditors comparing other insolvency options against an SBR proposal.
- Liquidations - Realise company assets and ensure these are distributed appropriately to creditors
Their responsibilities include responding to regulatory bodies like ASIC, ensuring compliance with legal requirements, and navigating complex financial landscapes to maximise creditor returns.
Under the Corporations Act 2001, IPs have broad powers to make claims against directors and others, including:
- Insolvent (wrongful or fraudulent) trading
- Directors loan
- preference payments
- Misfeasance
- Transactions under value
- Transactions defrauding creditors
IPs typically act for the creditors, balancing their duties carefully to avoid bias, but this often limits their ability to offer directors protective advice.
Furthermore, they assume significant personal risk during their appointment, as they are accountable or decisions made throughout the insolvency process.
"As a consequence, the IPs role often conflicts with the best interests of the company’s directors."
And for this reason, Insolvency Practitioners are unable to provide holistic advice to the director’s. This means that, without a Director’s Advocate, the director may not get a full understanding of the insolvency process and their options.
Why Directors Need a Director's Advocate
Engaging a Director’s Advocate to work alongside an insolvency practitioner provides directors with the support they need to navigate the insolvency process effectively. The advocate’s primary focus is to offer insolvency advice for directors, ensuring the director’s interests are prioritised.
The insolvency process can be challenging and legally complex for directors, who may face significant personal liability from an IP during the process.
A director's advocate provides a full picture of the options available in the circumstances, taking the director’s best interests as their primary goal. They act as an intermediary , offering crucial support and providing directors with:
- Control of the process: Giving control back to the business owner, by arming them with an understanding of the process.
- Solve the Problems: Implement measures to solve, or at least mitigate, underlying issues and foster good decision making.
- Advocate for the Directors: Advocating for the directors when actions are taken against them.
When a claim is made against a director or related party, a Director’s Advocate will act for the directors to find a commercial resolution to the matter.
Not all IPs are alike, so where an Insolvency Practitioner is required, a Director’s Advocate will select one that they believe will yield the best outcome for the Company and its directors in the circumstances, and often get access to discounted rates because the IP know they are working with someone who makes the process easier for both sides. This often means that we can offer director centric services for the same or very similar costs as going directly to them.
Choosing a Director’s Advocate
Some people refer to the process of representing directors in insolvency matters as “Pre-Insolvency”. This sub-industry within the broader insolvency industry is unregulated and often attracts unscrupulous activity that gives the broader advocate community a bad name. These parties often implement strategies that blur lines, or even cross lines.
"A good Director's Advocate will be consultative in their approach, rather than transactional."
A Director’s Advocate holds themselves to higher standards. They value their relationships with insolvency practitioners, advisors and clients alike, and should be a trusted intermediary that acts with integrity to get the best outcome possible in the circumstances, within the realm of commercially viable for both sides.
Thryvv.io - Director’s Advocates you can Trust
Engaging a director's advocate is essential for navigating the complexities of managing financial distress. At Thryvv.io, we specialise in offering comprehensive insolvency advice for directors, helping them navigate complex situations with confidence while looking at the bigger picture.
A Director’s Advocate will look at the bigger picture, helping their client’s understand all of their options, where possible avoiding insolvency action, and solving the underlying problems that may be causing the financial distress.
A director's advocate acts as a crucial intermediary, providing strategic insights, advocating for the directors’ interests, and facilitating a clearer understanding of their options. By ensuring that directors have the right support, they can make informed decisions that ultimately protect both themselves and their businesses during challenging times.
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