Endless co-authors Turnaround Code of Conduct
Every year many businesses are saved from collapse by turnaround investments made by private equity firms who provide a critical injection of capital, ideas and execution skills to underperforming or failing companies. Unfortunately the turnaround space is also occupied by firms which actively seek to make profits by closing businesses down and liquidating assets.
In order to better protect the reputation of the industry, a BVCA working group formed by Endless LLP, Better Capital, Rutland Partners and Rcapital, has led consultations with the turnaround community to produce a Code of Conduct for investors active in this space.
The final Code of Conduct for Turnaround Investors has now been published, acting as a set of guidelines which demonstrate the way in which certain BVCA members outline their genuine aims to save and turn businesses around whilst agreeing to abide by ethical practices in so doing.
Firms specialising in turnaround investments and members encountering turnaround situations are invited to sign the code. The code of conduct is a voluntary code which is self-enforced. If you wish to become a signatory please email Daniel Knight at the BVCA.
BVCA Code of Conduct for Turnaround Investors and BVCA Members Encountering Turnaround Situations
The members of the BVCA who sign up to the Turnaround Code agree to the following commitments:
- BVCA members aim at business rescue rather than closing a business to realise its assets.
- The positive and negative impact on lives of employees, customers and creditors will be carefully considered before investment. To the extent that the investment results in a negative impact on these lives, the investor will ensure that communication is clear to ensure that the affected people can make alternative plans where necessary and due process is followed.
- Interest rates charged on any debt funding will be set commensurate with the risk. Investment will be made with the dual aims of improving business and saving, or better, growing, where possible employment whilst also generating an acceptable return for investors who have funded the turnaround.
- Insolvency procedures should not be considered the default option. Alternatives which may achieve a better all round outcome (e.g. agreeing compromises with creditors or a pension scheme outside of formal insolvency) should be considered carefully before insolvency routes are adopted. However in some circumstances, where for example a business is exposed to large and uncertain liabilities, insolvency will be the only route to save a business.
- In the event of pre pack administrations, investors will request Insolvency Practitioners to ensure compliance with Statement of Insolvency Practice 16 as issued by the Insolvency Regulatory Body, R3.
- The investors will annually provide feedback to the BVCA on their turnaround activities to ensure that the BVCA can properly communicate with key stakeholders such as government bodies and the press about the turnaround activities of its members.