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How to keep a company stable even in times of economic crisis? The key is effective asset protection, says M&A expert

Protecting one’s assets in times of crisis is a crucial issue that is currently being addressed by many businesses. Ensuring business continuity in uncertain times can be very challenging when a company can very easily end up in financial difficulties, caused for example by a drop in demand or failure to receive expected payments. The Deloitte Mergers & Acquisitions Team provides legal assistance in protection from these risks and their potential impact. We talked to Daniel Vitouš, a Senior Manager at Deloitte Legal, who told us about what working in this legislative area entails.

Daniel, could you tell us about what interesting work you have been doing recently?

Well, as you know, James, I am a Senior Manager in the M&A Group here at Deloitte Legal in Prague, and I focus on Corporate Restructuring. This is not just about re-arranging or optimizing the holding structures of companies, but, especially in recent times, it’s been quite interesting that we have had a number of requests to take pre-emptive action to protect core assets.

Really, now that is interesting. Why would companies require asset protection at this particular time?

For me, the reasons for this seem quite obvious. Many companies are facing an unprecedented wave of legal risks. Business continuity can be disrupted if claims are made, and assets, or accounts, are frozen. Companies can all too easily run into financial difficulties in such circumstances, and, additionally, expected payments from suppliers or customers, too, may not be received.

OK, so, if I can ask, how do you go about protecting the assets or accounts of companies against this scenario?

Frankly speaking, protective structures cannot defend against all difficulties or claims, but what we can do is to pick out the crucial, the most important, assets of the company and separate them from the main business, and the difficulties connected to it. Again, this should be seen from the perspective of business continuity – those core assets needed for the operations of the company are the ones most vital for protection.

But, Daniel, can I be blunt – how ethical is such asset protection?

In my opinion, firstly, the answer is that this is not unethical at all. This is not any kind of shady business but a knowledgeable utilization of the legal tools for arranging the business in a smarter way. Secondly, by definition, we as Deloitte can’t advise on any kind of dubious service. We are not promising miracles when it comes to the separation of assets, and to solve all the potential problems of a company in distress. However, thanks to our wide experience in the field, and know-how in related legal tools, we are able to take out certain assets and protect them against risks. Thus, it’s possible to allocate the risks so that those less crucial for business continuity carry a higher burden than those required for day to day operations to continue. This, actually, is in the interest of all creditors, when you come to think about it, so that claims don’t inadvertently cease all company operations and don’t drive what could be a functioning and profitable enterprise into liquidation.

Is it possible that business owners, in seeking to protect core assets without your expert advice, could make matters worse?

Absolutely. And, in fact, James, this is something which we, unfortunately, see quite often. Not only can business owners make matters worse for their companies by taking hasty and unadvised actions, but they can then even find themselves facing personal liability. It can become part of our work to advise the business owners on protecting themselves, even, which is not an ideal situation by any means.

OK, fair enough, but why should companies seek core asset protection with Deloitte Legal, rather than, say, an international law firm?

As you can appreciate, James, this is not merely a legal question. There are always quite significant tax implications, and financial implications, to be taken into consideration, too. What might look like a wonderful solution legally, becomes, on examination from the other service lines, unfeasible or indeed quite risky. By having integrated holistic teams at Deloitte, of lawyers, tax advisors, financial consultants, and so on, our clients can rest assured that any protective measures don’t then come with unexpected financial or tax consequences.

Is your company facing challenging times and are you considering asset protection steps? If so, do not hesitate to contact our experts from the Deloitte M&A team who will be happy to help.

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