When your business runs into financial trouble, it is important to seek insolvency advice and support as soon as possible. There are a number of business insolvency options to consider. Finding the right option for your business will depend on a number of contributing factors. It is important to seek insolvency advice from a professional before you make any decisions. They may be able to suggest different ways of repaying your debt which don't involve liquidation or closing your business.
Finding an Insolvency Advisor
If your business is struggling, it is important to seek help straight away. You can rely on existing support, such as your lawyer or accountant, or you could engage the services of a professional Insolvency Advisor. An Insolvency Advisor has specialist knowledge about managing a distressed business and can assess your situation and provide insolvency advice.
Finding a trusted Insolvency Advisor can be difficult. Given the private nature of the situation, it can be hard to find word of mouth referrals. Luckily, the insolvency advisory industry is heavily regulated and it is easy to spot a qualified, legitimate advisor. They should have a combination of the following qualifications:
- Registered Liquidator with the Australian Securities and Investments Commission (ASIC)
- Member of Australian Restructuring Insolvency & Turnaround Association (ARITA)
- A member of Chartered Accountants Australia and New Zealand (CA ANZ)
- Member of CPA Australia (Certified Practicing Accountant)
What are the Options?
Companies that operate small to medium businesses have a range of options to deal with their financial difficulties and insolvency. These options are categorised into formal and informal solutions. Some advisors will only offer to assist with formal options while others will only offer informal assistance. At Revive Financial, we believe the best way we can help clients is by offering a full range of solutions to achieve the best outcome for their company.
Having both Company Liquidators and personal Bankruptcy Trustees in our office, we work to understand how best to help clients. In some cases, it may be the company that needs help, while in others, a director’s personal financial situation may be more of a priority. Revive Financial prides itself on being able to help with both of these scenarios.
Informal Restructuring Options
If directors seek help early enough, a business can be saved outside of a formal insolvency appointment. These options will often require the assistance of an appropriate advisor and include:
- Turnaround measures to improve cashflow and return to profitability
- Restructuring a business’s capital structure through refinancing
- Selling the business on the open market or to a related entity, for fair value on commercial terms.
Company directors undertaking these engagements can now access safe harbor protection to avoid personal liability for insolvent trading. Revive Financial recommends all directors looking at informal restructuring options commence safe harbor.
Formal Insolvency Appointment Options
Formal insolvency appointment options will require, or result in the appointment of a liquidator or administrator to take control of the company. These include:
- Appointing an administrator to allow the company breathing space to propose a deed of company arrangement (DOCA) to compromise the debts owed to the company’s creditors.
- Appointing a liquidator to take control of the company’s affairs, close its business, sell its assets and investigate and pursue legal recovery claims.
- Do nothing, in which case a creditor, often the Australian Taxation Office (ATO) will apply to the court to wind up your company and have a liquidator appointed.
Which Option is Right for Your Company?
If you want to continue trading, you will want the best outcome for your company it can realistically afford. This can only be decided after a proper review of your company’s financial position and discussion with you about the business. Whether an option is available to you, depends on:
- The company’s available cash compared to its debts.
- Whether it has, or realistically could have a viable business.
- Whether legal action has been taken by the ATO or another creditor.
- How up-to-date the financial accounts are.
- What surplus assets the company has if any.
- Whether the company is eligible for safe harbor protection.
In all cases, earlier action will always provide better outcomes.
Considering Your Insolvency Advice
You can make the right decision for your company by understanding its financial position, any pressures and the options available to you.
It’s important to note that while Revive Financial offers the full range of personal and corporate insolvency services, it can only act for you in one of the following roles:
- your insolvency advisor
- the appointee in a corporate insolvency appointment
- the appointee in a personal insolvency appointment
If you require another role, we can help you locate a suitable advisor or insolvency professional. Want to make sure you’re getting the right insolvency advice? Give us a call on 1800 560 557.
For more information on director advice, check out our director advice page here.