Professional Practice Standard 8 (PPS 8)

Succession Planning (ABRT Member)

The purpose of the Professional Practice Standards (PPSs) is to ensure Members of the Association for Business Restructuring & Turnaround (ABRT), and all those who work for, represent and act on their behalf maintain the highest professional standards at all times. Each PPS should be read in conjunction with the wider fundamental principles embodied in the ABRT Code of Ethics (Ethics Code) and should be applied in accordance with the spirit of the Code.

 

The PPSs set out practice guidelines ensuring that all those leading an engagement in the restructuring and turnaround of a business, as well as the resolution of financial distress of a business or its stakeholders, do so in a ‘best practice’ way, harmonised with all prevailing statute, and ethical and other relevant guidelines at all times. PPSs set out required practice but are not statutory or legislative statements.

 

A literal interpretation and use of a PPS may not be appropriate where it contradicts the fundamental principles of the Ethics Code, the regulatory or legal framework or any other applicable ethical codes to which the Member may be required to adhere to. Members should apply their own professional discretion, logical reasoning and rationalisation such that the PPS may also be applied to the full range of business structures.

 

1.     Introduction 

1.1.  Membership of the ABRT is personal to an individual Restructuring & Turnaround Practitioner. ABRT Members have an obligation to ensure that engagements are effectively managed, controlled and administered at all times; and to have appropriate contingency arrangements in place to cover unexpected changes in circumstances.

1.2.  The over-riding principle is that the interests of the client and stakeholders should not be unfairly prejudiced as regards the legal entity.

2.     Continuity

2.1.  Issues of succession can be mitigated where an ABRT Member is working as part of a turnaround team, takes engagements jointly or delegates work to employees or contractors.

2.2.  An ABRT Member’s system for managing engagements will need to consider on a regular basis the arrangements in place to ensure continuity and case progression in the event of death, incapacity to act, retirement from practice, or the practitioner otherwise retiring. 

3.     ABRT Member and Sole Restructuring & Turnaround Practitioner  

3.1.  ABRT Members who are sole restructuring and turnaround practitioners should consider the steps necessary to put a workable Continuity Agreement in place. The full consequences, both practical and financial, of the relationship must be recognised by both the ABRT Member and their nominated successor so that continuity can be achieved, and the interests of the client and other stakeholders safeguarded. 

3.2.  In particular, the nominated successor needs to consider whether the obligations arising from a successor arrangement can be discharged properly and expeditiously, having regard to the number and nature of engagements to be taken over.

3.3.  A retiring ABRT Member practitioner should have in place arrangements for the transfer of active cases in sufficient time to ensure that the cases are transferred before the retirement takes place or the professional indemnity insurance lapses.

3.4.  If the nominated successor is an ABRT Member, the transfer of cases should be facilitated as soon as possible after the other restructuring and turnaround practitioner’s death, incapacity or, if no other arrangements have been made, retirement. The arrangements with the nominated successor will need to be reviewed as circumstances dictate, but at annually at a minimum.

3.5.  The principal matters that might routinely be dealt with in a Continuity Agreement are set out at 6 below. 

4.     ABRT Member Practitioners and Firms

4.1.  Every ABRT Member Practitioner in a firm (whether a principal or an employee) should consider the comments made above regarding sole restructuring and turnaround practitioners, and should discuss with the firm the arrangements for succession planning, to cover death, incapacity to act, retirement, or leaving the firm. It is recommended that this is reflected in an agreement or documented set of procedures.

4.2.  Where there are no other ABRT Member Practitioners in a firm, and in the absence of any contractual arrangements to deal with death, incapacity to act, or retirement, an ABRT Member should have already considered the remaining partners or directors memberships of professional bodies, skillsets, qualification and experience to ensure the proper management of active practice engagements. This includes documenting the procedures and arrangements for another suitably qualified restructuring and turnaround practitioner to take the lead on the caseload. 

4.3.  The principal matters that might routinely be dealt with in an ABRT Member’s Succession Plan are set out at 6 below. 

5.     Disputes

5.1.  ABRT Members are not permitted to allow commercial disputes to obscure the over-riding principle set out at the beginning of this paper – that the interests of the client and other stakeholders should not be prejudiced.

5.2.  It is important, therefore, that the contractual arrangements referred to above should provide for the (essentially) mechanistic and financial consequences of an ABRT Member leaving the firm (or upon incapacity to act). There should be similar considerations when an ABRT Member (either partner or employee) is suspended by a firm or is otherwise excluded from the firm’s offices.

5.3.  If there is a dispute, it is for the ABRT Member to decide how best to ensure that their professional obligations can be discharged. The Association for Business and Family Enterprise Ombudsman (ASBFEO) may be utilised for alternate dispute resolution (ADR). It is always open to an ABRT Member to consult with the ABRT Board.

5.4.  As noted above, there may be professional obligations on remaining partners, directors or colleagues to arrange for the proper management of their firm’s engagements, and so ensure that they do not bring their own professional bodies into disrepute (such is the case where there are other ABRT Members, regulated Insolvency Practitioners, and/or lawyers or accountants in practice).

6.     Continuity Agreements and Succession Agreements 

Principal matters that might be dealt with in a Continuity Agreement:

6.1.  A clear statement of the circumstances upon which the agreement would become operative, and also the circumstances in which the nominated successor can decline to act.

6.2.  The extent and frequency of disclosure to the nominated successor of case details and financial information.

 

7.     Detailed provisions to provide for:

 

7.1.  the steps to be taken by the nominated successor when the agreement becomes operative;

7.2.  ownership of, or access to, case working papers;

7.3.  access to practice records (including the current Client Case Record); and

7.4.  financial arrangements.

 

8.     Principal matters that might be dealt with in an ABRT Member’s Succession Agreement: 

9.     Clear statements of what happens in the event of an ABRT Member (whether partner or employee):

9.1.  dying, or being otherwise incapable of continuing in practice;

9.2.  retiring from practice;

9.3.  being suspended or otherwise excluded from the firm’s offices; or

9.4.  leaving the firm.

10.  Where the agreement provides for another ABRT Member or restructuring & turnaround practitioner (whether in the firm or in another firm) to take over appointments: 

10.1.                 the time within which transfer of cases will take place, and the arrangements for the interim period, including provisions for access to information and files;

10.2.                 the obligations placed on the practitioner, the firm and the successor practitioner, both in the interim period and thereafter;

10.3.                 professional indemnity insurance arrangements; and

10.4.                 financial arrangements.

 

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