When faced with a distressed or troubled company, management, board members, regulators and other stakeholders will find themselves in the unfortunate situation of having to work together to determine the best course of action for the company. It is vital for all parties to take action early and engage experienced experts and outside counsel from the beginning of the process. Focusing on rigorous project management and knowing exactly what information you need will go a long way toward achieving a resolution acceptable to all parties. Management and the board should develop a sound remedial plan, regulators should aggressively assess management's plan and the board should remain engaged in the decision-making process.
In the end, it all comes down to determining the true financial condition of the company and comparing the risks of allowing the company to remain in business against the opportunities for minimizing loss. To weigh your options thoroughly along the way, you need a structured and balanced approach. Squire Sanders partners J. Lee Covington II and Jordan A. Kroop recently participated in a joint conference of the National Conference of Insurance Guaranty Funds (NCIGF) and the International Association of Insurance Receivers (IAIR). Drawing on their extensive experience with troubled insurance companies and some of the nation's most complex bankruptcies including Enron and WorldCom – particularly how insurance issues factor into corporate bankruptcy, reorganization and restructuring matters – they created a set of Troubled Company Best Practices for Insurance Professionals, which we are happy to now share with our friends in the insurance community.
For more information about lessons learned from managing some of
the largest troubled companies and insolvencies over the past 10
years, please contact
Mr. Covington or Mr. Kroop.
Mr. Covington maintains a national insurance regulatory and
corporate practice, with projects involving more than 35 states
during the past year. He is on the team of Squire Sanders lawyers
that was chosen recently by the US Treasury Department to assist in
the implementation of the Capital Purchase Program authorized under
the Emergency Economic Stabilization Act. He does expert witness
work and other work related to troubled companies and
receiverships.
Mr. Kroop, based in Squire Sanders' Phoenix office, was named
by Turnarounds & Workouts as one of the
nation's 12 Outstanding Young Bankruptcy Lawyers. He was listed
in The Best Lawyers in America 2009 and selected by his
peers for inclusion in Southwest Super Lawyers, a
distinction honoring the top 5 percent of lawyers in the region, in
2007 and 2008. Mr. Kroop is the co-author of the two-volume
treatise Bankruptcy Litigation and Practice: A
Practitioner's Guide (Aspen, 4th Ed., 2008) as well as the
Executive Guide to Corporate Bankruptcy (Beard Books,
2001). Mr. Kroop is also a member of the editorial advisory board
of the American Bankruptcy Institute.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
