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BE PREPAREDA practical guide for directors on their duties

POCKET GUIDE

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TRANSPARENCY.CONFIDENCE.TRUST.Some things can’t be bought, sold or traded.

Clients have relied on Duff & Phelps to help protect these fundamental ideals for more than 80 years. We deliver objective advice in the areas of valuation, dispute consulting, M&A, restructuring, and compliance and regulatory consulting. Balancing proven technical skills with deep industry expertise, we help our clients address their most complex business needs.

www.duffandphelps.co.uk

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“When a man assumes a public trust,” Thomas Jefferson wrote, “he should consider himself a public property.” The founding father was talking about the president of the United States, though directors will relate to the sentiment. Business leaders are public property these days. Being a company director is an endlessly varied,

stimulating and fulfilling occupation. To be at the pinnacle of an organisation, and be able to design, refine and implement a vision and a strategy is a privilege so many people aspire to throughout their careers, and so few achieve.

Opening yourself up to public scrutiny is the price of this success. After all, directorships carry responsibilities which no one considering a board role should take lightly. With the glare of public spotlight on businesses of all sizes, they cannot afford to. Board members get to the top by juggling competing priorities and striking a balance in everything they do.

This guide serves as a good introduction to how directors can make sure they continue to do this as a matter of course. The breadth of topics covered gives an indication to just how demanding the role of the modern director is. While building a brand and winning new customers, those round the boardroom table must also have a commanding grasp of their most fundamental duties. The board is responsible for the health of the business, and the list of issues directors need to be aware of seems to get longer by the year. This guide is a great place to start.

INTRODUCTIONDirectors are under ever closer scrutiny. This guide can help you fulfil your fundamental duties

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Simon WalkerDirector General, Institute of Directors

TRANSPARENCY.CONFIDENCE.TRUST.Some things can’t be bought, sold or traded.

Clients have relied on Duff & Phelps to help protect these fundamental ideals for more than 80 years. We deliver objective advice in the areas of valuation, dispute consulting, M&A, restructuring, and compliance and regulatory consulting. Balancing proven technical skills with deep industry expertise, we help our clients address their most complex business needs.

www.duffandphelps.co.uk

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CONTENTS3 Introduction IoD director general Simon Walker on the role good governance

plays in business success

5 Chapter 1: Just good governance What is it, the legal requirements and the importance of ethics. Plus

how to recognise bad governance when you see it

11 Chapter 2: People and culture Examines the issues concerning your people – everything from the

right culture to succession planning

17 Chapter 3: Risk and regulation Trends in fraud, bribery, cyber crime and director litigation, how to

avoid being a victim of crime and what to do if you are

29 Chapter 4: Operational risk The importance of good risk management, how social media can

help and why disaster planning is essential

35 Chapter 5: Transactions and finance How to balance risk and profit, stress-testing your firm’s finances

and how to get your M&A strategy right

41 Chapter 6: Zone of insolvency Access to a good insolvency practitioner can help directors when

a company hits troubled times

About Duff & PhelpsWhat happens when you combine complex data with human insight? When the certainty of numbers meets the scepticism of a trusted partner? When what you want to hear is tempered by what you need to know? Diligence becomes scrutiny. Fact becomes insight. And customers become lifelong partners. At Duff & Phelps, our combination of technical analysis and industry expertise is the difference that enhances value, helps our clients build businesses and gives them the peace of mind to make important decisions.Duff & Phelps is the premier global valuation and corporate finance advisor with expertise in valuation, dispute and legal management, restructuring, M&A and compliance and regulatory consulting. Since 1932, clients have relied on Duff & Phelps for objective advice. We serve public and private companies, law firms, government bodies, private equity firms and hedge funds. We also advise the world’s leading standards bodies on valuation and best practice.Duff & Phelps has more than 2,000 employees located around the world.

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JUST GOOD GOVERNANCEThanks to a string of recent scandals, corporate governance is now part of the business lexicon like never before. But bad governance is an easier trap to fall into than many directors think. We explain why overleaf – and offer tips on how to pre-empt such reputational damage in the first place…

CHAPTER 1: GOVERNANCE

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When the IoD’s director general Simon Walker said last June: “The reputation of corporate Britain took an almighty

kicking during the financial crisis, and several years later, is still on its knees,” he wasn’t overstating the case. Often the seeds of such executive malaise lie in bad corporate governance, as the recent litany of unethical behaviour has shown, whether it’s monstrous pay abuses, boardroom power grabs, or corruption at some of the world’s biggest sports bodies. As Walker said last summer: “Any attempt to restore public faith in business must start with good corporate governance, but focusing solely on how companies report compliance with a framework, while not looking at underlying behaviour, will simply not do the job.”

It isn’t just corporate behemoths or FTSE 100 mainstays that are vulnerable to bad governance. Smaller firms are not immune, as Paul Williams, managing director in Duff & Phelps’ global restructuring advisory division, explains: “We now live in a regulated community. Every time there’s a problem the response is [increasingly] more regulation and blame.”

Mismanagement for SMEs is commonly precipitated by the type of seismic life events that affect many middle-aged directors. “People often say businesses fail because of bad management,” says Williams, who has been involved with the restructuring of hundreds of companies during his 25-year career.

“Bad management happens because of distracted management. When restructuring SMEs, as one of my previous partners, Steve Billot, used to say, the biggest initiators are the ‘five Ds’: death, divorce, disaster, disease and ‘dinosaur’, usually taking place six-to-nine months before we get involved. Many people who set up businesses are in their forties, which is when divorce or the passing of, say, a parent is more likely to happen. You’re trying to run a business but have these huge distractions, so you take your eye off the ball.”

Likewise, a disaster (“maybe the failure of a major client or change of industry”) or a key team

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GOVERNANCE GOVERNANCE


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member off sick can be the cause. Generational changes [hence the ‘dinosaur’ reference] can also give rise to bad governance. “Most established businesses can just tick along,” he says. “The salespeople keep selling, manufacturers keep making, customers keep coming, but the business declines because of the distraction. When this distraction is severe and businesses go into decline, then the next level happens – individuals within the business start acting differently, becoming demotivated and destructive.”

Warning signs According to Williams, one key indicator can be the resignation of the finance director. “They’ve seen the car crash coming and realised the business is in decline, so off they jump. It’s not because they’ve spied a gap in the market – it’s because they’ve seen your business declining and are running away because you’re not on the ball.”

Williams’ advice for directors when this happens? “If you’ve been distracted by one of these events, you should be thinking, ‘Wait a minute, I’m not in charge’, and start reaching for help, either from trusted advisors or externally to help fix the problem.” To prevent such slip-ups, he stresses the need for company leaders to instil good governance in staff by being transparent about the firm’s values and objectives. “Many employees have no idea what the goal or tactics of that company are. They’re just told to do something which is [often] inconsistent with the overall direction the business is going in.”

Oliver Parry, senior corporate governance advisor at the IoD, says: “If you are appointed to the board of a major company, it’s unlikely


“Our goal is transformation – working with the management, shareholders, banks, suppliers, employees and turning it around” Paul Williams


they will hold you to reading the Companies Act, but you will be expected to know that you’re responsible for determining the company’s strategic objectives and policies, monitoring progress toward these, appointing senior management, plus accounting for the company’s activities towards relevant parties such as shareholders. It’s essentially about providing prudent oversight of the company and its long-term performance.”

Parry points out that the UK Corporate Governance Code isn’t as byzantine as it might seem. “It’s inherently flexible and applied on a ‘comply or explain’ basis,” he says. “It recognises that an alternative to a provision is justified if it achieves good governance and companies are prepared to be transparent.”

The blame gameFor unlisted companies, the ecoDa Corporate Governance Guidance and Principles for Unlisted Companies in Europe (governance.co.uk) sets out pragmatic standards companies can use for exercising better governance, ranging from the need for shareholders to establish a company’s governance framework to the obligation to build an effective board.

Neglecting prosaic bureaucratic duties, such as maintaining insurance or asset schedules or records of board minutes, can also give rise to bad governance. Indeed, the government recently threatened to prosecute the directors of a leading courier company, after it failed to notify the business secretary of any impending redundancies.

“Society is increasingly looking at and blaming people in charge of companies – i.e. the directors,” says Williams. “Recognising your plethora of corporate responsibilities is how you will [now] react to problems.” If this prompts visions of directors drowning in an avalanche of paperwork or red tape, Williams suggests establishing bureaucratic procedures when launching or scaling the business or outsourcing to an external company to help with extra work.

Forging a strong relationship with your


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accountancy team is also key. “You need to make sure you have a relationship with your accountants, investing time and money so they’re not just bean-counters who you go through the process with once a year, then saying, ‘I’ve been told what my numbers are like.’”

Corporate social responsibility (CSR) is increasingly being woven into business models too, with larger companies attributing some of their long-term financial success to the brand reputation engendered through positive records on governance and sustainability. With technology facilitating transparency within working cultures, there’s a growing expectation among the public that corporate power should be exerted more responsibly. Businesses are also expected to play a more prominent role in health, educational or environmental issues both within and outside the workplace. For those companies operating in developing countries, a commitment to the welfare of its workforce and their families, either in education or otherwise, is pivotal to their reputation.

For companies with governance worries, Duff & Phelps can help. “The mission for us is transformation – working with management and shareholders to fix corporates [suffering bad governance], involving banks, creditors, suppliers, employees and turning it around,” says Williams. “Part of Duff & Phelps’ role is to ask all the difficult questions and fix the problem if we can. If it’s not fixable, we go to the next stage – wanting to preserve brand value. If there’s no value, you may be putting the business to sleep.”

But as Williams says, such governance disasters can be prevented, by taking action


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“It’s essentially about providing prudent oversight of the company and its long-term performance”Oliver Parry


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GOVERNANCE

whenever any of the aforementioned distractions occur. “The DTI disqualifies 1,000 directors a year – it’s not a punishment for the past but a protection for people in the future,” he says. “That level of corporate governance and recognition of your responsibilities is increasingly here. Yes, it means more red tape and can be a distraction to those running small businesses. But that doesn’t mean there aren’t measures you can take to stop bad governance happening.”

Oliver Parry Senior Corporate Governance Adviser, IoDE: [email protected]: 020 7451 3280

Paul WilliamsManaging Director, Restructuring Advisory, Duff & Phelps E: [email protected] T: +44 (0) 20 7089 4780

Key takeaways

Contacts

Have shareholders set up a framework of corporate governance? Has your company established an effective board, which includes

a definition of the corporate strategy? Does the size and composition of the board reflect the scale and

complexity of the company’s activities? Is the board meeting regularly enough to discharge its duties and

conveying necessary information to employees? Are your levels of remuneration enough to attract and retain

executives and non-executives alike? Is there a sound system of internal control which safeguards

shareholders’ investments and company assets? Do the board and shareholders have a mutual understanding

of objectives? Have you considered finding a suitable non-executive director to join

you to bring an objective external focus to your meetings?


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GETTING YOUR CORPORATE CULTURE RIGHTWith directors under greater public scrutiny than ever, how should they balance the pressure of running a business while also inspiring confidence in their workforce and nurturing a healthy environment? The only way is ethics, as we explain overleaf…

CHAPTER 2: PEOPLE & CULTURE

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When, last summer, a newspaper exposé disclosed the aggressive management practices at a global tech giant, the

business world was stunned. Allegations of workers crying at desks, staff expected to be contactable 24/7 and employees put on performance reviews after suffering serious illness all meant the company took a direct reputational hit, generating negative headlines and leading some customers to boycott it.

“When corporate culture isn’t right, it can fester and cause problems resulting in long-term damage,” says Oliver Parry, senior corporate governance advisor at the IoD, who adds such bad practices were embedded into corporate culture long before last year’s exposé. “I’m sure bad culture contributed to the financial crisis, as the recent HBOS report suggests.”

The travails of this banking crisis may have eroded public trust in business, but it also elevated corporate culture into a hot topic, planting the term onto the radar of senior managers and boards like never before.

“Corporate culture has emerged as something very important over the last 18 months,” notes Parry, who adds that the Financial Reporting Council (FRC) has recently launched an initiative on the subject to gather insight into how boards can shape and assess culture, as well as identifying best practice.

Indeed, there’s a growing sense that culture and workplace wellbeing is an increasingly important recruitment tool with talented graduates shunning companies renowned for long hours and a competitive environment. The success of Silicon Valley start-ups imbued with this high-trust, flexible approach says it all. Furthermore, as Marks & Spencer’s Plan A environmental project (with its emphasis on waste reduction, saving energy and fair trade) and Whitbread’s commitment to tackling youth unemployment (it aims to create 6,000 apprenticeships by 2020) have shown, it can boost brand reputation too.

But while high retention rates and a strong work-life balance are generally indicators of

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PEOPLE AND CULTURE PEOPLE AND CULTURE


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a good corporate culture, the onus is still on directors to lead by example.

Not-so-splendid isolationGiven that many leaders fall prey to ‘lonely at the top’ syndrome as they scale their business, it’s easy to lose sight of malpractices within their company. “These people work increasingly hard, [creating] a level of separation [between them and employees]. That leads to problems, as it leads to people not coping well with issues,” says Phil Duffy, managing director in Duff & Phelps’ restructuring advisory practice, who has helped restructure hundreds of companies during his 30-year career. “It’s a classic problem we encounter.”

The 2015 Small Business, Enterprise and Employment Act (SBEE) outlines several ways directors can foster a stronger corporate culture among staff. The bill aims to reform zero-hour contracts while also stating that companies could face large fines if they fail to pay the minimum wage. The bill was regarded as the most significant legislation to affect directors since the 2006 Companies Act, which introduced the new requirement that “Companies [are] required to have at least one director who is a natural person [i.e. an individual]”, which prevents companies being the sole director of another business.

The issue of succession planning has loomed large in recent years, with one fashion firm promoting an internal designer to chief executive despite having no boardroom experience, and unrest at a major bank triggered by the board refusing to promote its chief executive to chairman. Says Parry: “Succession planning is


“The next generation are usually smarter, more IT-savvy and aware of what’s going on than the generation before”Phil Duffy


about ensuring you have a long-term strategy for your board composition. Appointing non-execs (NEDs) on an ad hoc basis is an example of bad corporate governance.”

Any companies thinking of appointing a successor should start planning at least one to two years in advance, says Parry. “You need people in place at the right time who understand challenges and threats to the business model, the digital economy and of the firm’s competition.”

Cast the net wideMeanwhile, Duffy suggests looking outside your usual nexus of contacts, perhaps changing board dynamics by introducing younger members to the top tier (a 2013 study found the average age of a British board member is 57). “The next generation are usually smarter, more IT-savvy and aware of what’s going on than the generation before,” says Duffy. “If you don’t bring them into play, you end up being a dinosaur, especially if [technological] change happens at the pace it does. These days, that means revisiting yourself every five years – otherwise you’ll find yourself irrelevant and out of touch. Then you’ll be gone.”

Similarly, Duffy says diversity should also be a prerequisite for board appointments. “It’s important to have women, young people and NEDs on the board,” he says. “For small businesses, in particular, a strong non-exec can be a great addition. It’s not just having your mate in, or retired bank manager you’ve known for a long time… I think that the experience of NEDs will become increasingly helpful.”

Business leaders should also be cognisant of the rules surrounding directors’ loans (whereby they or their family members receive non-salaried money from the company). Directors are required to keep records of any money they borrow or pay in – usually known as a ‘director’s loan account’ – along with providing details of any cash they owe the company, or vice versa, on their annual balance sheet.

Having an overdrawn director’s loan account can lead to large tax deposits to HMRC until it is repaid. Director employment and

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service contracts should also be drawn up. “All companies should have them!” says Duffy. “It’s something often overlooked especially when there’s a problem or dispute. You might have an employee who’s your best friend and next month is having a horrible divorce, becomes distracted and stops being an effective performer. What do you do about them? If you haven’t got an employment contract setting the rules of the road, how do you drive? You don’t.”

Social media is also playing a pivotal role in internal company culture. The inherently transparent nature of websites such as LinkedIn and Glassdoor allows staff and outsiders to expose flaws in governance, while it’s also an effective medium for companies to communicate goals directly to employees. According to Duffy, social media can also allow firms to harness their alumni network more effectively.

“People who used to work for your business who are working somewhere else, such as a secretary – how do they know what you’re doing? How do they know you’ve created something that their new boss might be interested in? The ability to share what you’re doing with an audience is much more powerful than it has been in the past.”

Duff & Phelps assists directors with people and culture concerns. “We can advise on the risk that NEDs take when they sit on regulated entity boards,” says Monique Melis, managing director in Duff & Phelps’ compliance and regulatory consulting practice.

“We can also write regulatory job descriptions for managers so they understand what their responsibilities are. If, say, you have a senior


“We can advise on the risk that non-executive directors take when they sit on regulated entity boards” Monique Melis


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PEOPLE AND CULTURE

management position at a bank, we’ll tell you of the responsibilities you have under the financial services regulation.”

Training is also a core part of Duff & Phelps’ service, with Melis saying the company regularly “mock-interviews managers before putting them before a regulator. If they go blind into the interview, and the regulator fails them it’s a huge embarrassment both for the individual and the bank management.” Until then, a growing awareness of employee welfare can do no harm. “The business landscape is changing,” says Duffy. “Get people and culture wrong, chances are you’ll get an ever-bigger stick used against you.”

Monique MelisManaging Director, Compliance and Regulatory Consulting, Duff & PhelpsE: [email protected] T: 020 7862 0837

Oliver Parry Senior Corporate Governance Adviser, IoDE: [email protected]: 020 7451 3280

Phil DuffyManaging Director, Restructuring Advisory, Duff & Phelps E: [email protected] T: 0161 827 9003

Key takeaways

Contacts

Does your role fit the criteria of the 2015 Small Business, Enterprise and Employment Act (SBEE) or 2006 Companies Act?

Have you ensured your company has a diverse board constitution? Have you drafted director loan accounts? Have you drafted director employment and service contracts? Are your staff fully aware of the training and development and

pension schemes available to them?


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MANAGING THE RISKS TO YOUR BUSINESSKeeping up with the changing nature of British business legislation is the bête noire of many a director. But with governments intensifying enforcement and the heightened reputational risks posed by technology, how can business leaders balance these regulations and hazards while still keeping their entrepreneurial spirit? Turn the page to find out…

CHAPTER 3: RISK & REGULATION

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The disruptive pace of technological innovation over the past two decades has presented business with manifold

opportunities, but has also saddled it with potential pitfalls, as the CIOs at TalkTalk and Carphone Warehouse – both of which were victims of recent data breaches – will no doubt testify. If safeguarding your company from such risks wasn’t enough, then there’s also the duty of keeping abreast of seemingly chameleonic business regulation, which governments generate at dizzying speeds. For many business people, ensuring their companies are equipped to cope with these changes can be a trying experience.

However, it’s paramount for businesses to ensure they can cope with such risks and regulatory changes. “Thanks to the UK Corporate Governance Code, regulators want to see viability beyond 12 months,” says Oliver Parry, senior corporate governance advisor at the IoD. “This means companies need to demonstrate a good, strong risk mechanism that will withstand threats to the business such as bribery and cyber

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RISK & REGULATION RISK & REGULATION


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attacks. Directors must ensure that risk awareness is embedded throughout the organisation.

“A company can have the best regulations in the world, but that won’t mean a threat to the business won’t hurt it. The best approach is to keep this risk awareness constantly updated. Business regulations are becoming more focused on how companies are run, so ensure your company has a strong compliance function that can stay abreast of any regulation changes.”

Due diligenceThe 2010 Bribery Act is one such piece of regulation. Heralded by the then-coalition government as “the toughest anti-corruption legislation in the world”, the backhander-supressing legislation states companies are now responsible for the corrupt actions of partners, agents and distributors. Therefore, firms should conduct due diligence on third parties by scouring public records and media, undertaking their own intelligence by speaking to other clients.

Although criticised by some in the business community for its lack of clarity on what exactly constitutes a ‘bribe’ (the Christmas bottle of champagne from your suppliers? The box you’ve hired for clients for the FA Cup semi-finals? The coffee in the boardroom?), bribery is no trivial matter, with a 2007 World Bank report estimating it costs the global economy $1trn a year.

Although more readily associated with the banking industry, money laundering should be on all companies’ agendas too. A recent report by the anti-corruption group, Transparency International, claimed that anti-money-


“Companies need to demonstrate a strong risk mechanism that will withstand threats such as bribery and cyber attacks” Oliver Parry


laundering [AML] checks in the UK often fall short.

To prevent potential money laundering, experts stress the importance of understanding your clients’ businesses. “You need to know what they do and how they do it, in order to get some idea of the expected cashflows coming through the products that you are servicing for,” says Richard Crannis, managing director in the compliance and regulatory consulting practice at Duff & Phelps.

“There are a lot of proceeds from financial crime – or dirty money – floating around the financial system, so when it comes to the source of funds, companies need to understand the ownership structure of their customers and that they are bona fide. They also need to understand transaction cashflows that might be going through the bank… If a firm gets these wrong, then they could expose themselves to potential regulator criticism, scrutiny and censure.”

Ongoing due diligence is also important, adds Crannis. “Is your customer on any sanction lists?” he says. “You need to monitor these on


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an ongoing basis, using a country sanctions list such as the US Office of Foreign Assets Control (OFAC) and the UK’s HM Treasury Consolidated Lists, understanding the risks they pose, having your own risk policy and driving how often you review the accounts and clients you have.”

If the customer has a politically exposed person, it may require greater vigilance, because, as Crannis points out, “they could be linked to drug money or terrorist finances”. And if you spy any suspicious activity, the National Crime Agency should be alerted.

Says Crannis: “If you expect a regular transaction of £1m every month, but one month they put through £3m, that would be out of kilter, so put processes in place to identify these activities on their accounts. Robust internal processes and policies are needed to ensure staff can escalate concerns to the appointed money laundering reporting officer, where relevant, who may have to do an investigation and, ultimately report back to an external body.”

During Duff & Phelps’ consulting activities, Crannis has witnessed British firms make some elementary mistakes which have led to money laundering. “We’re still seeing issues where financial services firms are falling down in terms of policies, procedures, and client documentation to support the rationalisation of why they have onboarded the client,” he says. “We’re also seeing failings where they’re not monitoring the client adequately, which could result in opportunities for clients to launder dirty money through their organisation. This means they would be in breach of quite a number of regulatory and legal requirements.”


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“Robust internal processes are needed to ensure staff can escalate concerns to the appointed money laundering reporting officer”Richard Crannis


Director disqualificationsNot meeting legal responsibilities could result in you being banned as a company director by the Insolvency Service. Despite high-profile bans in recent years such as those for the ‘Phoenix Four’ MG Rover directors (who paid £42m in bonuses, disabling the car firm), the number of director disqualifications has fallen from 1,437 in 2010 to 1,273 in 2014. The reasons? “Many disqualifications are the result of insolvency,” says Nick Matthews, managing director in Duff & Phelps’ disputes and investigations practice. “However, thanks to economic recovery and trends towards business restructuring, insolvency rates have fallen… Today most director disqualifications happen because of ‘unfair treatment of the Crown’ (not paying tax, for example).”

Shiv Mahalingham, managing director in Duff & Phelps’ European transfer pricing practice, predicts the biggest tax litigation-related pressures directors face in 2016 will be “increasing transparency from country-to-country reporting, coupled with exchange of information between tax administrations. This will lead to a continued increase in transfer pricing audits, with directors having to allocate resources to managing these audits.”

Protecting dataAlongside familiarising yourself with regulatory changes, it’s equally as important for business leaders to secure their company against potential


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“We’re still seeing issues where financial services firms are falling down in terms of policies, procedures, and client documentation to support the rationalisation of why they have onboarded the client”Richard Crannis


risks. In recent years, a spate of egregious data breaches has put cyber crime firmly on the radar of most businesses. Last year [2015], 157,000 people had their data violated in the cyber attack on TalkTalk (costing the company a reported £35m), including 15,000 who had their bank accounts hacked.

When infidelity website Ashley Madison was hacked last summer, it put 33 million account owners on edge, nervous that information about their adultery would be made public. Despite the rise of such cyber attacks, not to mention the average cost of an IT security breach to a British company estimated to be £1.75m, many senior managers remain unaware of risks. Indeed, cyber security is no longer a matter of protecting computer systems from viruses and worms, but safeguarding their customers’ information from cyber criminals. “Some companies consider themselves not to be at risk,” says Matthews.


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“Some companies consider themselves not to be at risk… You’ll never keep ahead of the hackers, but be ready to respond”Nick Matthews



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What directors need to knowShiv Mahalingham in Duff & Phelps’ European transfer pricing practice outlines what greater scrutiny on transfer pricing means for directors

TRANSFER PRICING

There is significant scrutiny on transfer pricing (prices applied by companies on intra-group transactions) at the moment. Directors are fighting this on two fronts: a) managing constantly changing regulations (over 60 jurisdictions were involved in the recent OECD BEPS consultation on transfer pricing outcomes) with heavy penalties for non-compliance and b) addressing increased media scrutiny and negative perceptions from consumers in relation to structures that may have been acceptable 12 months ago.

The key tipping point for transfer pricing was in 2013 in relation to a number of large multinational groups being challenged for booking low profits in high-tax jurisdictions despite high sales. Press coverage was quoted in OECD transfer pricing consultations, which was a significant break with tradition for these consultations that have been taking place for over 20 years.

Increased tax anti-avoidance measures and tax penalties seek to address instances of non-compliance and aggressive transfer pricing. In Britain, transfer pricing adjustments, interest and penalties could be sought as far back as 21 years of returns if there are instances of fraud – although this is rare.

Operational transfer pricing risk is a critical concern due to the volume of new legislation and the requirement to update operating systems to provide high-quality data on transfer prices.

Efficient transfer pricing design is still permissible and directors should continue to look for entrepreneurial opportunities around commercial change. Indeed, transfer pricing is recommended when there are mergers, acquisitions, business expansions or carve-outs.

Duff & Phelps can assist companies with transfer pricing issues by working with their in-house teams. We’ve got some strong expertise in the area, having worked with multinational groups to resolve disputes and to design transfer pricing structures in line with regulatory and commercial factors. Being a team of economists also gives us a unique perspective and a credible view on transfer pricing that is not tainted by the stigma of international tax planning.


“But this risk can creep up on them, especially where they have entered the world of online sales, holding customers’ personal and financial details. You’ll never keep ahead of the hackers, but be ready to respond.”

Matthews’ advice? “Have response plans, cover your own intellectual property and the customer, ensure your IT systems are fully protected, carry out a risk assessment and consider doing some penetration testing,” he says. “Make sure you have suitable insurance in place, plus put the cyber-security issue on the board agenda.”

For businesses that have transformed their company’s IT system in recent years by adopting cloud computing, security is still an issue and processes such as encryption and access controls should be tailored appropriately.

The role of chief information officers (CIOs) is also becoming increasingly important within large companies. Not only do they perform a vital function as a conduit between senior management and IT teams, but they should ensure anti-hacking measures are at the top of their agenda.

Furthermore, with hefty fines facing any company which breaches the UK Data Protection Act, all businesses should have a strong understanding of the law, especially given the fact that firms are responsible for keeping the data that they own secure – and not the cloud provider whose system they might be using.

Staying up to dateThe pressure of dealing with constantly changing business legislation is another quandary


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“Being a team of economists also gives us a credible view on transfer pricing that is not tainted by the stigma of international tax planning”Shiv Mahalingham



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How Duff & Phelps can helpRichard Crannis, managing director in the compliance and regulatory consulting practice at Duff & Phelps, explains how its specialists can advise companies

ADVICE

Duff & Phelps’ Compliance and Regulatory Consulting practice helps financial services firms to develop robust AML and financial crime frameworks. In the UK, we are also a member of the FCA Financial Crime Skilled Persons Panel, which means we have been recognised by the FCA as a firm with the required professional skills to undertake FCA-instigated reviews.Our expertise includes designing and drafting policies and procedures that clients need to have in place at a high level to protect themselves from risks.

We can undertake detailed reviews of systems and controls around AML and financial crime and provide recommendations to remediate any gaps identified. We also assist firms remediate any deficiencies. In terms of client onboarding we can review the associated processes, including reviewing a sample of client files to determine if the process and records maintained are sufficiently robust to meet Know Your Customer (KYC) regulatory expectations.


in which business leaders frequently find themselves. Even though most companies are au fait with more common statutes which govern everyday business, such as the Health and Safety at Work Act and Equality Act, Matthews notes: “More complex areas of business legislation, such as employment and EU-based laws, can catch people unawares.”

For any directors drowning under such legislation, “seeking advice from expert consultants or lawyers is crucial”, says Matthews. “Implement an ethical culture, from the top down. When an issue does occur, such as fraud or other incidents, address it – don’t ignore it, do something about it... Larger firms have compliance officers, even if they’re not regulated, but in small businesses, it’s down to the directors.

“Sadly, there is no single authoritative source of information on all developments. Take notice of media reports, have your financial director attend seminars on business legislation, but for specific issues there is no alternative but to seek expert advice,” says Matthews.

More generally, though, he adds: “If in doubt, write it all down, so if a decision proves to be wrong, you have an audit trail and evidence to show you have rationalised the decision.”

Adjudicating which risks and regulations will affect your business quite often comes down to a simple skillset: trusting your gut and common sense. “Obviously, the vast majority of directors are trying to do the right thing,” says Matthews. “But it’s about having that awareness and knowing who to ask when in doubt. Rely on your moral compass. If something feels wrong, do something about it.”


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“It’s about having awareness. Rely on your moral compass. If something feels wrong, do something about it”Nick Matthews


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RISK & REGULATION

Richard CrannisManaging Director, Compliance and Regulatory Consulting, Duff & PhelpsE: [email protected]: 020 7089 0860

Oliver Parry Senior Corporate Governance Adviser, IoD E: [email protected]: 020 7451 3280

Nick MatthewsManaging Director, Disputes and Investigations, Duff & PhelpsE: [email protected]: 020 7089 4813

Shiv Mahalingham Managing Director, European Transfer Pricing, Duff & PhelpsE: [email protected] T: 020 7089 4790

Key takeaways

Contacts

Every company should be aware of the following legislation and risks: Bribery Act 2010 Money laundering IT systems and data safeguarded against potential cyber-hacks The latest HM Revenue & Customs tax legislation Health and Safety at Work Act 1974 Equality Act 2010 Data Protection Act 1998


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ASSESSING OPERATIONAL RISK AND REWARDRisk is part and parcel of business life, but it can result in heavy losses or even the failure of the organisation. For a company director, the key is being able to assess and mitigate that risk without impinging on growth. Turn the page to find out more…

CHAPTER 4: OPERATIONAL RISK


Most of the risks that companies face fall into two categories, business risk and operational risk, with the latter often

the result of bad internal decision-making and practices. This can lead to the downfall of a business that is otherwise in good shape.

The definition of operational risk has evolved in recent years. At one time it was considered to be any unquantifiable risk that might be faced by a bank. Today it can be defined as the risk of monetary losses resulting from failed internal processes, people, and systems, as well as from external influences and events.

For example, if a company lacks a robust data security system, and stores sensitive data, including customers’ personal information online, in the event of a cyber attack and the loss of that data, the company can sustain massive damage to its reputation and its finances.

Other operational risks might include weaknesses in the supply chain, suboptimal performance from key members of the team, or poor quality control, that can result in substandard products and services. All of these potential scenarios can have a devastating impact on the business and constitute a cautionary tale for directors.

“As a director you cannot be an expert at everything,” says Matt Ingram, managing director in Duff and Phelps’ restructuring advisory practice. “But a company can mitigate operational risk by having a board of directors that takes in multiple views, assesses the risks at all levels, and makes an informed decision.”

It may be fairly clear where the most important strategic risks lie, but because operational risk can present itself in so many areas of the business, accurate operational risk analysis can be more difficult.

Consider contract risksAs Ingram explains, operational risk can stem from what initially appears to be a great opportunity for the business.

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OPERATIONAL RISK OPERATIONAL RISK


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He says: “Take the situation, for example, where a company lands a significant contract. The initial response will probably be to see it as fantastic and having the potential to dramatically change the company’s fortunes. But as many directors have discovered, it could change the company fortunes for better or worse and it all comes down to how the business assesses the risk and the reward of an opportunity on that scale.”

In the case of a company that manufactures aircraft components and is awarded a large contract by a leading aircraft manufacturer, there is the question of whether you have the required production capacity. The company might decide to invest in plant and machinery and raw materials, which then creates an operational risk around finance.

Ingram cites the frequently quoted adage, ‘turnover is vanity, profit is sanity’, adding: “When people chase turnover, it doesn’t necessarily mean they will make more money. If you don’t calculate the financial risk, you could end up not making any money.”

Another element of operational risk in this scenario is that having chased and secured a large contract, a company may not have the resources to service its existing customers or contractors, who may well go elsewhere. When the large contract comes to an end, the company has to start replacing those lost customers.

“You don’t want to stifle business growth by turning down good opportunities, but if you focus on growth with a strategy of continually assessing operational risk, it then becomes a calculated risk,” says Ingram.

Beware of digital dangersSocial media has become a marketing and communication tool of choice for many businesses, but without careful management it can pose a risk, primarily from a lack of login security around a company’s social media accounts, or through damage done to the brand online by disgruntled customers.



Oliver Parry, senior corporate governance advisor at the IoD, says: “Companies need to be aware of the risks and what damage could be done by not mitigating those risks. The speed of interaction on social media can work in the company’s favour, but it has to be managed in a smart way. My advice to any company that uses social media is to develop a formal social media policy.”

The board of directors is responsible for ensuring that control systems are in place to deal appropriately with operational risks. They may set up a risk committee to assess operational risks over the whole organisation, and decide which risks are most significant, and what measures should be taken to counter these.

If production is disrupted by equipment failure, key personnel are leaving because they are dissatisfied, and sales are falling because of poor product quality, the business can end up in serious trouble.

Assess your supply chainSupply-chain risk can also pose a threat to a company. Ingram says: “If a business is reliant on one key supplier there is a risk of being let down by that supplier, and we have seen that happen on too many occasions. As a director you need to plan for such an eventuality and spread your operational risk.”

As part of their risk assessment strategy, companies should have a disaster recovery plan, to minimise business disruption and loss of revenue and customers when disaster strikes. Typically people associate recovery or contingency plans with disasters such as fire and flooding, but they also have a role to play in operational risk. For example, where a company is reliant on complex IT systems, it may have a contingency plan for the availability of alternative IT facilities, in the event of a systems failure.

“Every company should have a disaster recovery plan, whether that involves transferring production to another facility, or


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keeping the wheels of the business moving while the cause of the disruption is dealt with,” says Ingram.

Pay regard to regulationMeanwhile Alan Picone, managing director, risk consulting at Duff & Phelps, adds that operational risk is a hugely important day-to-day consideration when it comes to the investment funds with which he deals on a daily basis.

“Being a director of one of these funds today, in light of the Alternative Investment Fund Managers Directive (AIFMD) and the regulatory system that has been put in place following the subprime crisis, it’s clear that operational risk management is migrating into a very holistic role, cascading down to the oversight and supervision of the risks stemming from delegated activities,” he says.

Duff & Phelps, adds Picone, has created a suite of solutions when it comes to risk management in general, and in particular when it comes to financial risk such as liquidity and market credit. “It’s a challenge, because a complete cartography of operational risk requires you to liaise with the value service providers, understanding their operational risks,” adds Ryan McNelley, a managing director in the valuation advisory practice at Duff & Phelps.

When defining different types of operational risk, a key distinction should be made between low-probability high-impact risks and high- probability low-impact risks. The risks with low probability but severe impact may require specialist insurance.

If risk management is to be effective and


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“Operational risk requires you to liaise with the value service providers to understand their risks”Ryan McNelley


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OPERATIONAL RISK

efficient, the board needs to understand the major risks that its strategies involve, and the major problems that could occur with its operations.

“Assessing operational risk as accurately as possible is vital,” says Ingram. “While gut instinct and experience can play a part in doing this effectively, it is an analytical process. If you don’t know how to carry out that risk assessment, seek professional advice. And even if you think you do, you should still seek advice. The consequences of not knowing the risks can be devastating.”

Alan PiconeManaging Director, Risk Consulting, Duff & PhelpsE: [email protected]: +35 2261 0880 631

Ryan McNelleyManaging Director, Valuation Advisory, Duff & Phelps E: [email protected] T: 020 7089 4822

Matt IngramManaging Director, Restructuring Advisory, Duff & Phelps E: [email protected] T: 0121 214 1130

Key takeaways

Contacts

Recognise that operational risk is defined as the danger of monetary losses resulting from failed internal processes, people and systems, as well as from any other external influences and events.

Mitigate operational risk by having a board that takes in multiple views, assesses the risks at all levels and continually makes informed decisions.

Achieve accurate operational risk analysis using analytics as well as director experience – both key to risk assessment.

Continually assess operational risk, making for more calculated risks in future.


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PRIVATE EQUITY, VALUATION AND MERGERS & ACQUISITIONSBuying and selling commercial entities can be fraught with complication, but a solid partner can help steer you through the process in a fair and efficient way. Turn the page to find out more…

CHAPTER 5: TRANSACTIONS & FINANCE

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It’s a given throughout the international business community that a director’s primary role is to create value, which may

require the balancing of a number of differing strategies including profit maximisation, long-term investment, ethical investing and stakeholder management among others. At the core of this is a solid understanding of financial metrics and forecasting – and an awareness that the difference between profit and cashflow can often constitute the difference between success and bankruptcy.

As well as supporting clients to derive maximum value in M&A deals, according to Duff & Phelps managing director Mike Weaver – who, having begun his career at PwC in 1995, has now accumulated 20 years of valuation experience – Duff & Phelps is often tasked with valuing companies in which a dispute has broken out between debt and equity capital providers or majority and minority shareholders. The issue of how to value a particular position can be highly contentious. “You need very strong and specific articles of association setting out how the company will be valued in various circumstances,” he says.

Valuable advice“Taking advice from a valuation professional when drafting articles of association, where the basis of valuation is clearly set out, is imperative,” says Weaver. “There are different approaches – formula valuation, for example, whereby the last three years of profits are multiplied by an agreed factor, which is fairly straightforward. Other cases require an independent market valuer to come in and assess the situation. The aim is to be fair to both sides by being completely independent.”

There are numerous variables which can complicate the process – making independent, highly experienced external expertise all the more imperative. “It gets tricky when the directors or shareholders still in the business have all the info,” says Weaver. “The capital provider or director invariably has no access to

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TRANSACTIONS & FINANCE TRANSACTIONS & FINANCE


37

the books. It takes a big push by the valuer to get all of the information to carry out their remit fairly and comprehensively.”

Another complicating factor – and another thing directors need to consider when facing such a scenario – is the fact that market value is based on what an investor is prepared to pay for the future cashflows associated with any position. Assessing the likely future cashflows is always open to interpretation.

As well as hefty legal costs, individual stakeholders could be left with a valuation that they feel is neither right nor fair. And the less the director is involved in a company, the less clear they can be about future prospects. “You’re very much on your own,” as Weaver puts it. Then there’s the further exceedingly complex factor of an organisation’s cross-border spread. While family businesses are generally less complex, according to Weaver, as the shareholding is usually fairly equal, the trickiest examples tend to arise when a director is appointed with a five per cent stake and little control. The majority of control, therefore, lies with the rest of the team, whose ownership comprises 95 per cent.

M&A activityA further area in which Duff & Phelps offers support is in the field of mergers and acquisitions advisory. “We advise privately owned, private equity-backed or public companies in executing their M&A, whether it be buying, selling or raising debt and equity,” explains Henry Wells, managing director in Duff & Phelps’ London office and part of the global mergers and acquisitions advisory practice. “We generally


“It is imperative to take professional advice when drafting articles of association to ensure the basis of valuation is clear” Mike Weaver


act for shareholders of companies – they are sometimes directors but not always. So, quite often we find ourselves in a situation where we have to provide advice to shareholders of the company, where the directors clearly have legal responsibilities, not just to the company but also to the shareholders.”

Private equity deals can be different, and difficult, for the uninitiated, and Duff & Phelps’ expertise is invaluable, says Wells, when it comes to helping clients tread carefully through the complex ground arrived at when shareholders and directors have conflicting agendas. “With SMEs, we sometimes see sellers who have views on value – whether that is due to their views of potential buyers or the market,” he says.

“Market value is what anyone’s prepared to pay at the time. Private company valuations do move up and down, and businesses are often acquired for strategic reasons. So one business might point at another and say, ‘Right, well this was bought for 10 times that amount, and when you dig under it, you realise the reason they paid 10 times was because of X and Y. And if those factors don’t apply to your business, a different valuation may apply.”

Despite the complex nature of the M&A beast, Duff & Phelps has successfully represented clients in mergers and acquisitions across the UK business landscape. In the last 12 months alone, the team has helped to complete deals in each of the following sectors:

• Business services• Consumer, retail, food and restaurants• Energy and mining• Healthcare and life sciences• Industrials• Media and entertainment• Technology and telecoms

Great expectationsWhile Wells emphasises the key role Duff & Phelps can play when it comes to maximising value, he also points out that there’s much more to maximising value than just headline


38


price, such as smart structuring, completion mechanics, treatment of cash, earn-outs and performance ratchets, which are all critical parts of a transaction… “These and many other aspects need to be planned for and should not be left until the last minute. A tailor-made approach is absolutely pivotal for successful M&A and a cookie-cutter approach is not an option we would consider.”

The wealth of expertise and repertoire of skills offered by Duff & Phelps in the transactions and finance arena go beyond these areas. The company also specialises in borrowing and lending structures, debt advisory services, tax structuring and tax efficiency.

And seeking outside help for dealing with these potential quagmires is imperative – as Oliver Parry, the IoD’s senior advisor on corporate governance, points out. “Not all directors are finance trained, so they rely on their finance director’s knowledge and their internal audit function,” he says. “Directors need to be aware that auditors come out once a year, and seek external professional advice to ensure the company’s finances are in order.”

Handling conflicts Certain transactions have inherent conflicts: a majority equity owner providing additional equity capital to the company; two companies owned by the same private equity sponsor – but in different funds – consider a deal; the CEO wants to buy another company in which he has an ownership interest. What are directors to do when they find themselves bargaining on both sides of the table? Owing a duty


39

“Usually we’ll exceed price expectations, but sometimes we have to think about how we can smartly structure things”Henry Wells


40

TRANSACTIONS & FINANCE

to all shareholders, directors are advised to seek a fairness analysis and opinion from an independent financial advisor like Duff & Phelps.

At Duff & Phelps, fairness opinions are not an add-on service but a core practice. Duff & Phelps is comfortable rendering fairness opinions situations involving minority interests and with limited or no market checks. With a reputation built over decades, Duff & Phelps’ fairness opinions practice delivers high-quality financial advice and opinions that withstand the most rigorous scrutiny.

Henry WellsManaging Director, M&A Advisory, Duff & PhelpsE: [email protected]: 020 7089 4876

Mike WeaverManaging Director, Valuation Advisory, Duff & Phelps E: [email protected]: 020 7089 4773

Key takeaways

Contacts

Consider cash as important as profit when assessing the financial wellbeing of an organisation.

Appreciate that articles of association must set out a well-defined value mechanism.

Seek an external, independent valuation expert when assessing a business's market value.

Be aware that you may have a fiduciary duty to the debt providers and shareholders as well as to the company.

Seek external professional advice to ensure that the company’s finances are in order.


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HOW INSOLVENCY AFFECTS DIRECTORSWhen a company struggles financially, the pressures on a director can be immense. Insolvency laws are onerous and, to avoid falling foul of them, you must understand your duties fully and have access to a good professional insolvency practitioner. Turn the page to find out more…

CHAPTER 6: INSOLVENCY

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Directors of companies often make the mistake of believing that they are immune from liability for the acts of

businesses which are facing insolvency. They must understand that they – as well as their company – may be liable for debts owed to creditors.

Their first move, other than seeking relevant professional advice, is to consider putting creditors’ interests before those of a company’s shareholders in such circumstances. This represents a stark change of focus for a director, whose primary role is to determine the company’s strategic aims – monitoring progress towards achieving those objectives and ensuring that the business is in a good position to build successfully. However, this shift in emphasis can help prevent a director face accusations of wrongdoing, or even being disqualified from acting as a director.

Oliver Parry, senior corporate governance advisor at the IoD, says: “Insolvency legislation has changed significantly in recent times and continues to change. As a consequence, if your business is struggling financially it is key to seek high-quality professional advice. If your business is going into administration, you’ll need to consult with your employees and appoint an administrator.”

Take action once the warning signs have been spottedThese are situations that Paul Corlett, a director in Duff & Phelps’ restructuring advisory practice, deals with all the time. He has worked with many directors who have found themselves in difficulty because of business insolvency. He says: “Some of them have not taken any advice, or have taken advice but at a very late stage, or even been advised poorly by someone with no relevant experience in dealing with distressed businesses facing insolvency.

“However, most of the directors we see are in this situation because they have failed to heed the early warning signs of trouble

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INSOLVENCY INSOLVENCY


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and take appropriate and reasonable actions promptly. Sometimes this is because they are so heavily focused on finding solutions that they lose sight of the reality of the current position the business is in.

There is often a misplaced desire not to incur further costs associated with obtaining professional advice despite its potential benefits to them and the business. Some directors simply struggle to come to terms with the seemingly parlous financial position of the company and what that means to all concerned. This can result in them failing to uphold their responsibilities as a director, and potentially falling foul of the law.”

Unless they understand their obligations when a business starts to struggle or recognise their lack of knowledge and thus seek appropriate professional advice, directors can easily find themselves in this position.

Robert Goodhew, also a director in Duff & Phelps’ restructuring advisory practice, adds: “Anyone can become a company director, and there is no formal requirement for training or experience as we know. “However, often all it takes is for the head of finance to leave a company – the person with the financial skills and experience – for the director with little or no financial experience to be left at the helm, potentially in a vulnerable position at a time when the business is facing financial difficulty and having to make difficult decisions.”

Understand the financesAccording to Goodhew, understanding the business’s finances is vital for directors to


“Most of the directors we see are in this situation because they have failed to heed the early warning signs of trouble”Paul Corlett


enable them to discharge their responsibilities appropriately. He says: “As a director, you must have a finance function that you have confidence in to deliver the accurate, relevant and timely information you need to be able to spot signs of trouble. Those signs might be identifying sharp and dramatic changes as well as gradual, more subtle changes to revenue, costs and cashflows.”

It is important to make an honest assessment of your ability as a director to know about and understand the company’s finances. Corlett adds: “If you are the sales or marketing director, even if you have no detailed financial knowledge, if the business is going downhill, you are not necessarily absolved of responsibility. The fact that you are not a member of the finance function doesn’t mean you can ignore problems. As part of your responsibilities as a director, you are obliged to act. That could mean raising your concerns with your fellow directors to seeking help from a professional advisor.”

When there are signs of a problem, the company should hold frequent board meetings to review the situation and document its thinking. Close monitoring of the financial position shows a commitment to dealing with the issues, but it is also vital for directors to keep notes of all discussions, recording how and why decisions were made, while being mindful of the impact of decisions on the company’s creditors, and the steps being taken to control matters.

Goodhew says: “Directors should keep their own record of events. Any concerns should be brought to the board’s attention.”

Beware of legal threatsKnowing exactly when to cease trading is tricky. There is a fine line between a business experiencing and managing financial issues on an ongoing basis and one that is insolvent and has no future prospects. Nevertheless, directors must be aware of the risks of crossing that line and being accused of wrongful trading. It is at


44


this point that a director “…knew or ought to have concluded that there was no reasonable prospect that the company would avoid going into…” insolvency, adds Goodhew. “At the point when they have become aware, they should also become proactive,” says Corlett. “It is vital they recognise that their duty of care as a director to the shareholders now becomes a duty of care to the creditors.”

Continuing to trade and worsening the position for creditors while ignoring the now known problem opens the director up to a number of personal liability risks. Doing so could lead to an adverse finding against a director in a case of wrongful trading or other claim of misfeasance which may result in the director being compelled to compensate the company for the losses caused. It could also result in a director being banned from holding office for up to 15 years.

Directors are obliged to act in the best interests of all creditors. Repaying certain debts in favour of others without robust legitimate business reasons that stand up to external scrutiny could lead to accusations of preferential treatment, which may be overturned by a court. Similarly, selling company assets for below their market value to raise cash to pay creditors could result in the court overturning the transaction or finding the director guilty of misfeasance.

Seek professional adviceThere is no hiding from a failure to uphold these duties, as once a business fails and is placed into formal insolvency proceedings, the appointed insolvency practitioner is legally obliged to report on the conduct of the directors who held office in


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“Directors should record how and why decisions were made. Any concerns should be brought to the board’s attention” Robert Goodhew


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INSOLVENCY

the three years prior to the insolvency.Company insolvency is a problem that no director wants to face, but with a sound understanding of their duties – and the help of an appropriate professional advisor, such as an insolvency practitioner – directors can emerge from the experience with their reputation intact.

Robert GoodhewDirector, Restructuring Advisory, Duff & PhelpsE: [email protected]: 020 7089 4739

Paul CorlettDirector, Restructuring Advisory, Duff & PhelpsE: [email protected]: 020 7089 4884

Key takeaways

Contacts

If a business becomes insolvent, directors should shift the focus of their responsibilities from the company and its shareholders to the interests of creditors.

Directors should monitor the company’s finances and be able to spot potential problems early. When there are signs of difficulty, the company should hold frequent board meetings to review the situation and document its thinking. They must do this regardless of their financial skills or knowledge.

Be consistent. In the event of insolvency, the insolvency practitioner has to report on the conduct of directors who held office over the previous three years.

Document all board decisions explaining the rationale for each. This forms the evidence to show that a director has taken appropriate action in the circumstances at that time.

Be clear about what directors can and can’t do when the company is trading during financial difficulties to avoid claims of alleged wrongdoing.

Seek professional advice from an insolvency practitioner at the earliest opportunity.

www.duffandphelps.com/beprepared


INSOLVENCY

The Shard, 32 London Bridge Street, London SE1 9SG +44 (0) 20 7089 4700

The Chancery, 58 Spring Gardens, Manchester M2 1EW+44 (0) 161 827 9000

35 Newhall Street, Birmingham B3 3PU+44 (0) 121 214 1120



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M&A advisory and capital raising services in the United States are provided by Duff & Phelps Securities, LLC. Member FINRA/SIPC. Pagemill Partners is a Division of Duff & Phelps Securities, LLC.

M&A advisory and capital raising services in the United Kingdom and Germany are provided by Duff & Phelps Securities Ltd., which is authorised and regulated by the Financial Conduct Authority.

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