Book review: Insolvency and Financial Distress: How to Avoid it and Survive it by Brian Finch

If the stressed chief executive of an underperforming business reached for this book in desperation, the question is: would it help? The short answer is yes, but it would not be a panacea or an alternative to professional advice.

Style-wise, Mr Finch has successfully crafted an easy read, and his use of examples from his personal experience help bring the book to life in several places. However his reliance on lists to back up each point can often feel interminable.

He devotes a significant section of the book to dealing with the alternatives to insolvency which is to be applauded. He covers many of the methods used by insolvency practitioners to rescue businesses, however I was disappointed by the absence of any mention about the financial difficulty scheme operated by the government’s Redundancy Payments Office. This scheme can provide loans for up to 36 months to fund redundancy payments outside a formal insolvency. This little-used facility can make a big difference to funding survival outside an insolvency process. There was also a missed opportunity to stress an important benefit of the Crown covering redundancy liabilities in a company voluntary arrangement.

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The author makes a number of good points in the chapters covering practical problems, particularly on the importance of maintaining a good credit score. Much of the book’s content is useful for non-accountants, such as the explanation about the interaction of accounting records with insolvency at the end of the first chapter. However, Mr Finch could have done more to reinforce the importance of retaining sufficient ‘rainy day’ reserves in better times.

Notwithstanding the health warning in the preface and the final chapter about seeking professional advice, there is a danger that the stressed reader may selectively apply advice contained in single chapters without reading the whole book. As an example, early on the book warns of the dangers of directors ‘wrongfully trading’ their company. However the importance of keeping detailed minutes to record decisions is not sufficiently emphasised.

There are some inaccuracies in the book. There are technical points regarding proxies and fees that are wrong, but probably not of direct relevance to the reader. Page 88 states that an administrator may disclaim uneconomic contracts or leases – he may not. There is no mention of the carve-out of funds from floating charge realisations being available for unsecured creditors. Worryingly the book also states that there is no redundancy liability for employees over 65 years of age. That is plainly wrong; the Equality Act came into force on 1 October 2010, well before the book was published. Such liabilities can be significant and affect the solvency of a business.

So, while this is a helpful book, the reader would do well to take note that there is no substitution for taking professional advice, and the earlier the better to increase the chances of survival.

Published by Bloomsbury