Two groups, two approaches, two different results.
Regardless of all of the legislation, cases and technical points, insolvency deals with people.
While personal insolvency obviously deals directly with a real person, every company has real people who control, run, build and sometimes have to liquidate the company.
Real people are governed by human nature and, with the experience of many thousands of insolvencies to guide us, we often see human nature at work. This is particularly obvious at the point of having to make a decision on whether to commit to appointing an insolvency practitioner to themselves or their company.
For many of us, we do not like to admit defeat, and sometimes looking for help from strangers looks like defeat. Yes, all of you blokes who will not ask for directions or read the instructions, I am looking at you. Compound that part of human nature many fold, and you start to see the turmoil that some people will go through when making a decision on an insolvency appointment.
Some people will not even seek advice, or when advice is offered, will ignore it.
Generally the first time that these people encounter a trustee or liquidator is when one turns up at the doorstep brandishing a court order. It is far too late to resolve any financial difficulty at this point.
We find that people who will seek advice will normally fall into two groups.
Those who will make a decision fairly quickly.
Those who will delay a decision.
We see the evidence of this when we first discuss alternatives with people. If someone actively seeks advice they often do so before their situation is hopeless and action is possible to rectify their financial problems. The point being that an early decision can give a greater range of options.
The group of people who make a decision to act early can use options that give a better result, like Part X arrangements under the Bankruptcy Act 1966 and Deeds of Company Arrangement under the Corporations Act 2001. Unfortunately these people are the minority.
The other group of people delay making a decision for a variety of reasons. We see them generally leave our office armed with the alternatives available to them, and it is not uncommon for them to only return to proceed with an appointment many months later. Often creditor action is what prompted them to return. Simply, human nature stops them from committing to the help from strangers earlier.
By this time some of the earlier alternatives are no longer available, particularly when a trading business is involved. Earlier on stock and trading conditions may have allowed a work-out of some sort. Later, when stock and working capital are depleted, trading-on is generally not possible and this will limit what alternatives are available. Commonly, the only alternatives at that time are a bankruptcy or liquidation.
What we know is that the earlier a person commits to a strategy, the better the result. The longer it takes to make a decision, the fewer the alternatives.