Insolvency Response Planning
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Insolvency Response Planning Is Business Planning

 

 

 

Dennis O'Dea practiced as a partner in large business law firms and lead his Special Financial Services Group practice model in developing innovative cutting edge strategies in dealing with bankruptcy, insolvency risk, and business reorganization.

He opened The National Insolvency Practice to serve businesses and individuals confronting the challenges of bankruptcy, business reorganization, litigation and other conflicts that arise from the insolvency of a customer, partner, supplier, subsidiary or other key business relationship.


The Problem with Vendors and Customers

The development of "outsourcing" and "supply chain management" has moved many essential sources and functions out of direct control.  In reducing overhead and replacing operating units with contracts for goods and services from others, many companies consider the operational risks of supply disruption and business failure in the supply chain, but rarely consider the disruption of their contingency plans by insolvency and moratorium laws. Contracts may be held open and enforced against companies by debtors in Bankruptcy. Even the most sophisticated and well thought out recovery plan is useless if it is enjoined or unused as a result of the automatic stay in US Bankruptcy.

In non-bankruptcy settings, there will be essential suppliers whose products or services cannot be quickly substituted or replaced. There will also be customers whose products have long lead time for fabrication and dedicated overhead expenses and inventory that must be dealt with. Accommodations to distressed customers and vendors can make the company a target of competing creditors and the dependent company.  Contract rights and default terms have limited power when economic realities require changes. 

The insolvency or financial distress of a key business relationship requires a coordinated business and legal response that is often overlooked and poorly coordinated. Unless there is a coherent and integrated strategy for dealing with the unavoidable conflict and changes that insolvency creates, many companies will continue to learn the need for a national insolvency program by experiencing the unexpected and unhappy consequences of its absence.




 
 
The National Insolvency Practice and the Insolvency Response Matrix methodology were designed to provide the tools that will enable companies and their leaders to make the right decisions when insolvency changes the deal.

   "The time to find out whether your supply chain owns your company is before you have to extend terms, make advance payments, buy inventory, and become an investor in key supply source."

Dennis O'Dea   

 


Affiliates and Independent Analysis

The firm provide clients with the tools they need to respond to insolvency risk, bankruptcy, and the unique litigation spawned in the realignment of interests and relationships caused by insolvency risk such as the developing "deepening insolvency" claims that have proliferated in recent years and the continuing realignment of priority interests of secured creditors in bankruptcy resulting from inter creditor agreements, disputes and shared collateral claims.


The Insolvency Initiative is designed to complement existing in-house legal teams as well as existing external counsel relationships. In many cases, the complexity of insolvency makes it difficult for lawyers who were deeply involved in transactions to litigate disputes. In parent/subsidiary relationships, insolvency may make it essential that independent counsel advise the affiliated companies. Whenever a complex business organization faces its own insolvency concerns, the board should seek independent counsel knowledgeable about insolvency risk, board duties, and the competing interests of stakeholders.


It is now commonplace for companies seeking bankruptcy relief to engage special counsel as so-called "conflicts counsel" as part of their initial filings. Though often characterized as forward-looking and cautionary engagements, the need for independent counsel is usually understood long before a bankruptcy case is commenced and reflects long-standing, but potentially destabilizing adverse relationships that demand independent counsel. In multi-tiered corporate structures, courts may order independent advisors and other special protective devices.

The National Insolvency Practice provides early warning analysis and advice that could mitigate the harm of unforeseen or poorly structured conflicts. For privately held companies, insolvency counsel must often advise the owners that, despite years of joint representation, they must find new lawyers and may not expect protection of the attorney client privilege held by their company. Counsel for owners and counsel for the company they control must work together for a common goal but may view their client obligations quite differently. Advance analysis should reduce the risk of conflict and unexpected loss.