How to Assemble the Ideal Board for a Post-Bankruptcy Enterprise

May 28, 2014 Published by

Learn how to recruit and retain an effective board following a company’s declaration of bankruptcy. Our firm explores the complexities that arise when recruiting board members for a post-bankruptcy vs. a financially sound company. We hope to demonstrate how to create an effective board of directors that will position your company for long-term success, rather than just addressing short-term challenges and goals1.

The Differences in Board Recruitment

Financially Sound CompanyPost-Bankruptcy Company
  • Recruit directors whenever vacancies arise
  • Frequency of recruitment will depend upon electoral schedule or directors’ extenuating circumstances
  • The entire board is recruited and approved by the court at one time
  • Prior to this approval process, various creditors will vet the board slate
  • You may operate on the court’s and creditors’ timelines while choosing your board
  • The board’s nominating committee acts in the best interests of all stakeholders to put directors on the electoral ballet
  • The ballet is then voted on at the annual general meeting
  • The company (the debtor) must negotiate with creditors to create a board that is agreeable to the latter
  • This collaborative privileges the priorities of external stakeholders
  • Precise financial reporting is important regardless of the financial wellbeing of your company
  • However, a financially healthy company may appear to offer more opportunities to contribute to the success of an organization, without additional and potentially disruptive work
  • Financially sound companies will have the reports and statements that prove the health of the company, and this will attract potential directors
  • Post-bankruptcy boards may have an uphill battle when attempting to recruit directors who have the knowledge and skillsets to support the company’s long-term goals
  • Understandably, there are concerns regarding whether or not the company will revert back to financially unstable practices
  • Potential board members will study the company’s financial statements and reformed operational processes to ascertain whether or not the company will thrive

How do you find the right board members for your post-bankruptcy board?

How to assemble a post-bankruptcy board

  • Take your time
    • At least three months before a board slate is received by the court, your company and the creditors you are collaborating with should begin the search to retain board members
      • During this beginning stage, consider hiring an external and objective team of recruiters who can help you to find the best possible candidates for the vacant positions
  • Create a specific job description
    • Ensure that your job description informs board members regarding their potential duties and the environment that they will work
  • Recruit candidates with:
    • Relevant experience
      • The ability to serve as a member or chair on one or more of the following committees:
      • Collaborative leadership
      • Avoid competitiveness and unhealthy conflict on your board by electing members who are wholly independent of one another
    • Experience that will be necessary for long-term plans
      • i.e. if cost controls need tightening, hire a financial expert
  • Be thoughtful and thorough
    • Narrow down your list of applicants until you have reached a number that allows you to effectively manage reference checking and in-person interviews
    • Speak to their previous board members and determine whether the potential candidates were:
      • Action-oriented
      • Collaborative, but not passive
      • Measurably successful in attaining objectives
      • Skilled in specific areas that will benefit your board

Recovering from bankruptcy is a complex process. Having the support of strategic professionals will help your company to regroup, recover and become repositioned for success. Although a Board of Directors are required for larger companies, many small to medium sized companies may opt for a less formal process, namely a Board of Advisors. If you need objective advice regarding post-bankruptcy processes, contact financial professionals who can provide guidance that has transformed the financial futures of enterprises across Canada.