CIRIP Ghana urges distressed firms to seek early help

The Chartered Institute of Restructuring and Insolvency Practitioners Ghana (CIRIP Ghana) has called on financially struggling and distressed registered businesses to seek early professional intervention to revive their operations instead of resorting to winding up. CIRIP Ghana, supported by the Corporate Insolvency and Restructuring Act, 2020 (Act 1015), aims to assist businesses in navigating through challenging times.

CIRIP Ghana President Mr. Felix Addo emphasized the importance of early intervention, as the collapse of a business can have far-reaching consequences beyond the owners and creditors, including job losses, reduced tax revenue, and diminished productive economic activity. Mr. Addo highlighted that businesses often wait until their financial difficulties have escalated before seeking assistance, urging them to seek help as soon as distress signals arise.

Internal causes of corporate distress, according to Mr. Addo, include poor corporate governance, such as undisclosed conflicts of interest, weak oversight, and decisions made in personal interests rather than company interests. Weak internal controls and inadequate auditing practices were also cited as contributing factors. The CIRIP Ghana president warned against relying solely on additional borrowing to address liquidity problems, as this could exacerbate the situation if there is no clear plan to restore financial health.

Access to fresh working capital remains a significant challenge for businesses already classified as non-performing loans, and CIRIP Ghana is collaborating with the Bank of Ghana and other stakeholders to facilitate post-commencement financing for businesses in administration. Businesses should be aware of early warning signs, such as delayed salary payments, difficulty meeting routine expenses, and creditor demand notices, and seek professional assistance promptly.

CIRIP Ghana will continue to collaborate with stakeholders to strengthen Ghana's restructuring and insolvency regime, ensuring viable businesses have a better chance of recovery.