Companies Hit by Pandemic Need Support

I am confident that companies that had a healthy business and steady cash flow when the pandemic hit have good chances of surviving. The boards, management and employees of many companies have worked together to overcome these difficult circumstances. We can only hope that the finish line is now in sight.

It also seems that creditors are not looking to push bankruptcy onto companies that could be rehabilitated despite currently being in dire straits. Companies should be proactive in contacting their owners and creditors to look for solutions together. Voluntary debt arrangements or corporate restructuring proceedings could help many companies weather this storm. This would not only help the distressed companies, but also ensure that the companies’ partners and creditors benefit more than they would in a bankruptcy.

The courts should not set the threshold for access to restructuring proceedings too high but should trust in the ability of professional administrators to assess what companies are suitable for restructuring. It is also important that legislation not make things more difficult for companies undergoing restructuring.

The EU’s recent actions seem inconsistent in this regard. At the same time as the Union is considering and enacting rehabilitation tools for companies, it is tightening solvency requirements for banks in ways that discourage banks from financing companies undergoing restructuring, or it is blocking the use of state aid or the refunding of energy tax to companies in financial difficulties. All this just as it would be vital to support struggling companies, not kick them while they are down.

Unfortunately, there is no way that every company will survive this pandemic. What is fortunate though, is that attitudes in Finland have changed over the past decades, and bankruptcy is no longer seen as a disgrace, but as a part of entrepreneurship.