What happens when things go wrong? If a company runs out of money or the finance director commits a fraud? If a product does not go down well in the ­market, or a competitor beats it with something ­better? If a company loses money on a speculative venture or if a major debtor fails to pay a bill? If ­technology overtakes its reason for existence? There are many ­reasons why a company can slip into ­insolvency, or ­possible insolvency, but whatever the reason, the effect can often be crisis.

What is the solution to the crisis? Can the ­company survive by rationalising its business or selling off parts of its enterprise? Is the solution a merger or a takeover of a smaller competitor with better products? Can the directors carry on trading and, if so, how can they avoid the legal pitfalls of wrongful trading, which can sometimes lead to personal liability? Has the company fallen so far that it cannot be rescued outside of a ­formal insolvency process and, if so, which insolvency process is the right one? Should a competitor buy a company in trouble and, if so, how does that ­competitor bid for the assets and ensure that it, too, is not tainted by the insolvency? How should the ­employees and their pension funds be protected? If the company is listed on a stock exchange, what role does the stock market and the stock exchange have? If the company has been the victim of fraud, or if executives in the company have committed fraud, should the ­police or the Serious Fraud Office be involved?

At the heart of all these questions is a legal ­solution. Without a careful application of the law to what is often a very dynamic and fast-moving ­situation, it is not possible to identify and implement a solution.

Working culture

This area is a fascinating part of the law for those ­interested in applying legal solutions to rapidly ­evolving problems where the very life of a company and all it stands for is at stake. For those who prefer their law at a leisurely pace, without the drama of a ­collapsing company, redundant employees or tight deadlines, this is not the area of law for you.

If it does interest you, then prepare for a highly charged but technical, never-the-same-day-twice rollercoaster ride. And do not make the mistake of thinking that insolvency lawyers are like legal ­vultures hovering over the commercial battlefield. There is nothing more satisfying than taking part in the ­successful rescue or restructuring of a major company, with jobs secured and financial meltdown avoided.

Because most companies these days are so ­complex, this area of the law touches every other area, from tax to real estate, pensions to company law, ­litigation to employment law, regulatory to ­competition law. Also, if the company is an ­international one, it involves ­interplay between the laws of many different ­countries.

Skills required

Insolvency can be very technical, so do not be fooled by those who think insolvency lawyers are ­permanently at lunch. The law is also very fast-­changing and ­increasingly international and ­insolvency lawyers are as likely to be considering cases from the New York Bankruptcy Court as from the High Court in ­London.

Because insolvency lawyers are involved in a ­dynamic and distressed process they need to develop an ­instinct for all other areas of law and know enough about those areas in general terms. Advice often has to be given quickly, commercially and directly without much time to produce dissertations from hallowed ­libraries. Even if lawyers do have the time to write it, the client often does not have the time to read it, and so the art of direct, punchy solutions is very important. You also have to be more than a lawyer, particularly if ­advising directors of a company collapsing around them. You must be a good listener, able to understand and manage ­relationships, occasionally assertive, and always ­staying close enough to the problem to understand it and ­assist in resolving it – but not so close that you lose your ­objectivity and become part of it.

Recent developments

A lot of people may well have been lulled into a false sense of security over the past few years. While ­everyone hears the words ‘markets can go down as well as up’, what they remember is ‘markets go up’. The same is true of house prices and salaries, but not ­inflation, which is always expected to go up.

How things change. Some of those in banks and ­professions in the City of London at a senior level have never known a marketplace in which recession might be just around the corner. So much for ­abolishing the days of boom or bust.

Thanks to the credit crisis, the collapse in ­confidence in the financial markets and housing and retail ­sectors, builders and everyone else who benefits from so called ‘discretionary spending’ are finding the ­current times very challenging indeed. It is therefore an appropriate time to look at the ‘black arts’ of ­insolvency and be aware that an exciting and ­rewarding career is ­available, even though it may lack the glamour and prestige of the big-ticket M&A deals corporate lawyers handle.

Stephen Gale, partner, Herbert Smith