#crisis—social media and insolvency

#crisis—social media and insolvency
The growth of social media over recent years has affected all aspects of the business life cycle. Will Richmond-Coggan, a partner and solicitor-advocate at Pitmans LLP, takes a look at how social media issues can arise if a business becomes insolvent.

What social media-related issues can arise on insolvency? How are these issues significant to a business experiencing insolvency?

The very immediacy and reach of social media, which makes it so attractive a tool for communication with customers and other stake-holders in a business for much of the time, can pose significant problems for a company on the cusp of insolvency, or where insolvency has become inevitable. These risks can be in relation to third party (ie external) social media, but also in relation to the social media accounts owned and operated by the business itself.

The first risk arises at the pre-insolvency stage, where recovery may still be possible provided that creditor relationships can be carefully managed. In those circumstances, panic spread by a disgruntled customer, employee or creditor via social media, can be fatal to that recovery strategy. Anxiety about the business can spread like wild-fire, leading to a race between creditors to get paid before it is too late. Ironically, in their anxiety they will undoubtedly cause the very thing they fear—the failure of the business. Similarly, there is often a period between the presentation of a winding-up petition and its formal advertisement in the London Gazette, during which negotiation with the petitioning creditor may be possible without other creditors needing to be alerted—the advantage of that negotiating window can be lost if news of the presentation of the petition leaks out via social media.

Equally, though, even once the insolvency process is underway, social media can present a variety of challenges. The most important of these is the ownership of the company’s social media accounts. While, formally, these may be an asset of the business, the practical

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.