I consulted attorney Jeanot de Cuba about the issue of bankruptcy and what they call in the USA Chapter 11, the temporary suspension of payments.
According to de Cuba, in our current vulnerable state where we don’t know whether the crisis/recession will last 3 to 4 months or one year, it is best to proceed with caution and NOT make any radical decisions. We should continuously assess the situation, and weight common sense against our fear/despair/panic/paralysis.
Don’t proclaim yourself bankrupt in a rush, he says, because you will lose your business.
See if you can navigate the situation, and seek other temporary relief measures.
Our Inflexible labor laws, he explains, are based on the assumption that employees need protection. Also our rental laws, are based on this social, 19th century idea, and are exceedingly tenant-friendly.
It makes it difficult for business people/owners to unilaterally amend agreements, we always require the court’s help. The law certainly provides the possibility to amend agreements, but at the end of the day it is up to the judge and his world view, to interpret the law and deliver the verdict.
And all this takes time.
In the current never-before, extreme, pandemic situation, the totally unforeseen circumstances created chaos in our economic landscape usually filled with small restaurants, rental places, beauty salons, saturating the market over the past years.
This financial disaster will separate the men from the boys, de Cuba says apologetically, but will also sanitize and clean up our cluttered economy.
In Aruba, in general, talking about bankruptcy or chapter 11 reorganization is still considered taboo, but we should get used to talking about the subject because this will be a daily phenomenon here.
In the case of bankruptcy, you must present in court, then a trustee is appointed who will liquidate assets, pay creditors, a certain percentage of the debt, then the company no longer exists.
But in case owners apply for suspension of payments it will bear creditors off. Then to discontinue labor agreements owners must go to the Department of Labor. If the court granted a suspension of payments, the Department of Labor will follow their lead. Certain rules apply to Collective Labor Agreements, and to essential businesses, which must be taken into account.
This suspension of payments solution is only helpful to those with a strong brand identity, brand following, a good business model, vision, agility and solid business practices. If those find themselves under an extreme, temporary, liquidity crunch, then that’s the way to go.
Having been granted a suspension of payments, owners get a chance to organize, re-organize, get rid of dead weight, waste, and reinvent themselves.
But first let’s get the virus under control, de Cuba says.
After that we may recreate our business environment, a sustainable lean and trim machine, the weak will die, the strong with survive. The suspension of payments will help.
This is a great opportunity to tweak and fix our business models, digitalize, experiment, innovate, de Cuba concludes.