Professional Money and Loans Advice

Voluntary rescue frameworks

Voluntary rescue frameworks aim to provide a stable environment in which all the participants involved in negotiating a company’s rescue can do so, without any fear of their relative positions being worsened as a result. Such frameworks generally share a number of important features:

• They tend to provide for principles or guidelines, rather than prescriptive rules. The key
  objective is to retain flexibility so that the principles can be put into operation on a
  case-by-case basis.
• Stress is placed on achieving stability in a company’s business and, in particular, finances. This is usually achieved by the major financial creditors (at the very least) agreeing to a moratorium, or standstill, so that a company’s current situation and prospects can be ascertained.
• The gathering and sharing of reliable information about a company’s financial situation and future prospects is seen as a critical prerequisite for developing a sustainable solution.
• Risk-sharing. The participants agree to share equitably in the risks and rewards of the process.
• There is usually the need for an independent mediator in the event of disagreements
  between the participants. For example, this role has traditionally been fulfilled by the Bank of England in the United Kingdom.