CIRIP Ghana urges distressed firms to seek early help

BY KINGSLEY ASAREThe Chartered Institute of Restructuring and Insolvency Practitioners Ghana (CIRIP Ghana) has urged financially struggling and distressed registered businesses to seek early professional intervention to revive their operations rather than resorting to winding up.

He said the Corporate Insolvency and Restructuring Act, 2020 (Act 1015) and the Chartered Institute of Restructuring and Insolvency Practitioners, Ghana to support struggling business to survive.

The President of CIRIP Ghana, Mr Felix Addo, said early intervention was critical because the collapse of a business had consequences beyond its owners and creditors, including loss of jobs, tax revenue and productive economic activity.

Speaking at the CIRIP@20 Editors Forum in Accra on Wednesday, on the theme: ‘The Media: An Invaluable Partner in Ghana’s Restructuring and Insolvency Journey,’ Mr Addo said the CIRA law provided a framework for viable but distressed businesses to be restructured and rescued rather than liquidated.

He said many businesses waited until their financial difficulties had become severe before seeking assistance.

“Once we start seeing the distress signals, we should put our hands up and ask for help,” he said.

Mr Addo identified poor corporate governance as one of the major internal causes of corporate distress, citing conflicts of interest, weak oversight and decisions that were not always taken in the best interest of companies.

“Many a time, we have conflicts which we don’t disclose and decisions which are not independent, which are not made in the best interest of the company, but are made in the personal interest of members of the board,” he said.

He also pointed to weak internal controls and inadequate auditing, saying some businesses were reluctant to engage external professionals because their owners believed they could manage their affairs without outside assistance.

“The environment is so dynamic and changing. You need modern ways of doing business. You may be very comfortable in your little corner, but the competition out there is way ahead of you,” he said.

He cautioned companies against relying solely on additional borrowing to deal with liquidity problems, saying that could deepen their difficulties if there was no clear plan to restore the business to financial health.

According to him, one of the major challenges facing corporate restructuring in Ghana was access to fresh working capital for businesses already classified as non-performing loans.

He said CIRIP Ghana was engaging the Bank of Ghana and other stakeholders on measures to facilitate post-commencement financing for businesses undergoing administration.

“The company is already distressed. It needs fresh working capital. And if the company’s owners are not willing or able to put in new equity, it means that there’s no money to turn it around,” he said.

Mr Addo said the legal framework provided protection for post-commencement financing, but regulatory issues affecting banks needed to be addressed to make such financing more accessible.

He stressed that businesses should not wait until creditors began issuing demands or legal action was initiated before seeking help.

He cited delayed salary payments, difficulty meeting routine expenses and demand notices from creditors as some of the early warning signs that should prompt businesses to seek professional assistance.

“When you start having the signals of distress, you don’t wait. Like a human being, when you are sick and you wait, you don’t go to hospital, the sickness becomes worse,” he said.

Mr Addo said CIRIP Ghana would continue to work with relevant stakeholders to strengthen Ghana’s restructuring and insolvency regime and ensure that viable businesses had a better opportunity to recover.

BY KINGSLEY ASARE