PETALING JAYA: The sign of a company in distress is its growing business issues that further decrease the company’s value, according to Deloitte Malaysia executive director Khoo Siew Kiat.
Khoo advised business owners to act fast and find solutions when their companies are at the early stage of decline.
“They need to think about ways to improve cash flow as well as the causes of losses and the negative cash flow. Look for opportunities to turn around the business, including different ways of financing, and dispose of non-core assets so the company can maintain the core business.
“Business owners should start thinking about how to improvise the business on financial terms and business issues before it is too late,” he told the audience at a webinar by the Chinese Chamber of Commerce and Industry of Kuala Lumpur and Selangor (KLSCCCI) entitled “Corporate Disputes, Restructuring, and Reinvent” yesterday.
Khoo said when the problems are manageable in the beginning stage of the company’s distress, it is easier to talk to bankers, creditors, debtors and customers.
“When the problems have become complicated in the later stage of the distress, it is difficult to carry out proper restructuring. Companies can apply Corporate Rescue Mechanisms (CRM) when they show signs of distress. CRM is divided into formal processes and informal processes.
“Formal processes include judicial management, corporate voluntary arrangement, and Scheme of Arrangement under Section 366 of the Companies Act 2016.
“Informal processes include Corporate Debt Restructuring Committee and other forms of voluntary arrangement with some or all creditors on deferring payments, rescheduling of payments, discounts, waivers, and other processes,” he said.
AIGF Advisors Pte Ltd partner Daniel Yong said some effective initiatives to reinvent and transition sunsetting businesses into new phases included strengthening governance, building the right infrastructure, bolstering management, and introducing strategic relationships.
“These initiatives have helped companies such as Jaya Grocer and KFC Malaysia to turn around their businesses,” he added.
