Professional briefing - The Journal Online

In-house Annual meeting
“Experience is
something you
get a split
second after it
would have
been useful” –
one of Robert
Armour’s
favourite
quotes
52 / theJournal December 09
You are the one to whom everyone will
turn to keep them out of trouble; but at
the end of it all you may be the sole
survivor. A bit oversimplified, but those
were two of the points to come out of
Robert Armour’s keynote address to the
In-house Lawyers Group’s annual
symposium last month.
“Crisis management” was his
theme, and if anyone can speak from
experience on the subject it is Armour.
The former general counsel of British
Energy, the nuclear power generator,
he arrived in the hot seat through
takeovers of his previous employers,
was there in 2002 when the company
had to be taken over by the
Government to prevent it collapsing,
saw it through a re-flotation, and was
still in post four years later when it in
turn was bought up, by which time its
value had trebled. On top of that, of
course, nuclear power plants, though a
“huge area for the UK economy” in
Armour’s words, are not everyone’s
idea of nice friendly businesses to run.
“Crises are each different”, he
commented. “They make life intensely
interesting; they raise the blood
pressure; they give you something to
look back on. You have to plan and
give shape to your company’s
response; there is a huge variety of
different interests and influences; but
you have only limited influence.”
For British Energy, the real crisis
point arose about seven years ago, at
a time when the power generation
industry as a whole was in difficulties.
Electricity prices were as low as a third
Calling
the shots
As corporate general counsel you
could be the one making the key
decisions in an insolvency situation,
according to this year’s ILG
keynote speaker Robert Armour.
Peter Nicholson reports
of present rates – and forecast to
remain low for a decade! – and the
company, which had a history of
underinvestment in its plant, was
“decried” in the market.
Sole protection
Without going into all the messy
details of how British Energy was
turned round, some points stand out
for in-house advisers from Armour’s
experiences. First of all, you, the board
and the employees are all in uncharted
territory – but everyone is going to
turn to you, the “gatekeeper”, for
advice to keep them right; and “you
may be the only person between the
directors and jail”.
Keep yourself as an honest broker;
and be fair and equitable, or it will
backfire on you. Oh, and while you’re
at it, they’ll probably expect you to
manage the business as well.
You may also, as a lawyer, be the
only one who thinks and sees things
differently from the directors: most
boards know each other and they are
probably all from the same mould.
The one rule is, you pay for
everything. All the fees, that is. You
will need help from your external
legal advisers; but you also have to
control what is spent on them (“or
you will get real grief”) – no easy
matter when you have no bargaining
power and they will probably
demand to be paid weekly.
They will become your friends – but
they also have fees to earn and
reputations to protect.
Don’t get yourself into “a
paralysis of non-risk taking”. It’s
important to be prudent; hindsight
will be the test; but don’t be overpessimistic.
Armour was not helped
by advice from his external legal
firm that said “maybe” in the 48
hours before a key decision on
refinancing was required.
When the finger points
Although an adviser, you may well
find yourself in the spotlight. Think
how your photo will look in the
press. Watch what you say. The press
will judge you and politicians will
look for a scapegoat. Don’t expect
fair treatment.
You may also find yourself being
quizzed by the FSA or other investigators,
and having to answer questions like
“Didn’t you see it coming?” Hindsight is
a wonderful thing.
How prepared were you?
“Corporate crises overwhelm
companies.” The old world has gone
and you meet an entirely new group
of people. There is a “complete
underworld” of lawyers and
accountants who deal with distressed
companies. They are “much pushier
and more self assured” than the
people you are used to dealing with.
But in Armour’s case they didn’t
understand how a Governmentsponsored
restructuring worked.
Your board will probably go, but
you can’t afford to be sentimental.
Your duty now is to the creditors, and
also to the business.
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