Frequently Asked Questions Voluntary Administration
Voluntary Administration offers several crucial benefits. Primarily, it provides a temporary delay on creditor actions, giving your business much-needed breathing room to restructure. It allows for the exploration of options to continue trading through a Deed of Company Arrangement (DOCA), potentially avoiding liquidation. This process can lead to improved cash flow, reduced debt, and a better outcome for creditors compared to immediate liquidation.
If your business is experiencing persistent cash flow problems, mounting debt that you can’t manage, or facing legal threats from creditors, it’s time to consider Voluntary Administration. Early intervention is key. Seeking professional advice before the situation deteriorates significantly can maximise your options and increase the chances of a successful restructuring.
The Voluntary Administration process typically lasts around 25-30 business days from the initial appointment of the administrator to the second creditors’ meeting. However, the exact duration can vary depending on the complexity of the case, the cooperation of stakeholders, and the specific circumstances of your business.
Frequently Asked Questions: Liquidation
Creditors’ voluntary liquidation is initiated by the company’s shareholders when they realise the company is insolvent or likely to be insolvent in the near future. Court liquidation is ordered by a court, often at the request of a creditor or regulatory body.
The liquidator is an independent professional appointed to take control of the company’s assets, realise them, and distribute the proceeds to creditors according to legal priorities. They also investigate the company’s affairs and report to creditors on the company’s financial position.
Assets are distributed according to a strict legal priority, with secured creditors typically receiving payment first, followed by employee entitlements and then unsecured creditors. Employee entitlements are also given priority.
Directors have specific duties during liquidation, including cooperating with the liquidator and ensuring that all company records are provided. They may also face personal liability if they have engaged in insolvent trading or breached their directors’ duties.
Frequently Asked Questions: Receivership
The receiver’s primary role is to manage the assets or operations of a company on behalf of a secured creditor, ensuring that the creditor’s interests are protected and that the assets are realised in a way that maximises returns.
Receivership is typically initiated when a company defaults on loan agreements or fails to meet its financial obligations to secured creditors, leading the creditor to enforce their security.
Receivership focuses on managing specific secured assets for the benefit of a secured creditor, while liquidation involves winding up the entire company and distributing all assets to creditors. Receivership can occur without the company being liquidated.
During receivership, directors may lose control over the assets or operations managed by the receiver. They are still required to cooperate with the receiver and provide necessary information. Directors duties still apply.
Frequently Asked Questions: Small Business Restructuring
SBR is a formal insolvency process introduced by the Australian Government to help financially distressed small businesses restructure their debts while continuing to trade under the control of their director.
To be eligible, a company must:
- Be incorporated in Australia.
- Have total liabilities of less than $1 million, including related-party debts.
- Be up to date with employee entitlements (including superannuation).
- Be substantially compliant with tax lodgement obligations.
A registered Restructuring Practitioner (RP) is appointed to:
- Assess the company’s financial position.
- Help prepare a restructuring plan.
- Submit the plan to creditors for approval.
- Oversee the implementation of the plan if approved.
No. One of the key benefits of SBR is that directors remain in control of the day-to-day operations while the Restructuring Practitioner manages the restructuring process
What does a restructuring plan include?
The plan outlines:
- How much creditors will be paid.
- The timeframe for payments (up to 3 years).
- Any conditions or milestones for the business to meet.
Creditors vote on the plan. It is approved if a majority in value of creditors vote in favour. Once approved, the plan is binding on all unsecured creditors.
If creditors reject the plan, the company may consider other insolvency options such as voluntary administration or liquidation.
The initial phase (plan preparation and creditor vote) typically takes 20 business days, with an optional extension of 10 business days. The repayment period under the plan can be up to 3 years.
- Lower cost than traditional insolvency processes.
- Directors stay in control.
- Faster and simpler process.
- Opportunity to continue trading and retain value.
At EKC Advisory, we:
- Assess your eligibility for SBR.
- Connect you with trusted Restructuring Practitioners.
- Assist in preparing and negotiating your restructuring plan.
- Support you through every step of the process.
Frequently Asked Questions Debt Consolidation
Business restructuring offers a range of benefits, including improved cash flow management, reduction of unsustainable debt, increased profitability, and enhanced operational efficiency. By streamlining processes and optimizing resources, businesses can achieve greater stability and long-term growth. Restructuring also allows businesses to adapt to changing market conditions and enhance their competitive advantage.
Businesses should consider restructuring when they experience declining profitability, increasing debt burdens, operational inefficiencies, or when faced with significant changes in market conditions. Recognizing these signs early allows for proactive intervention, increasing the likelihood of a successful turnaround. If your business is showing signs of financial strain, or a large market shift, it is time to consider restructuring.
The business restructuring process typically involves several key stages. It begins with a comprehensive financial analysis and operational assessment to identify areas for improvement. This is followed by strategic planning, which may include developing new business models, streamlining operations, and renegotiating debt. The final stage involves implementing the restructuring plan and monitoring its effectiveness.
EKC Advisory provides expert guidance and support throughout the business restructuring process. Our team develops tailored restructuring plans based on a thorough understanding of your business’s unique challenges and goals. We offer financial modeling, operational optimization, and strategic planning services, as well as assistance with debt negotiation and implementation. We focus on creating sustainable solutions that drive long-term growth and stability.
Frequently Asked Questions Safe: Harbour
The primary purpose of the Safe Harbour provisions is to encourage directors to seek professional advice and take proactive steps to rescue financially distressed companies, without the fear of personal liability for insolvent trading.
Directors can utilise the Safe Harbour provisions when they are actively pursuing a course of action that is reasonably likely to lead to a better outcome for the company than immediate administration or liquidation.
Directors must demonstrate that they are developing and implementing a plan that is reasonably likely to lead to a better outcome, seeking advice from qualified professionals, and keeping accurate records of their decisions and actions.
EKC Advisory provides expert guidance and support throughout the Safe Harbour process. Our team helps directors develop and implement effective turnaround plans, provides financial analysis and advice, and ensures compliance with the legal requirements of the Safe Harbour provisions.
Frequently asked questions ATO Tax Negotiation
The key benefits include establishing manageable repayment plans, potentially reducing outstanding tax liabilities, avoiding further penalties, and alleviating the stress of dealing with the ATO.
Businesses should consider ATO Tax Negotiation when they are facing difficulties in meeting their tax obligations, have accumulated tax debt, or are facing ATO enforcement actions.
The process involves analysing your tax debt situation, developing a strategic negotiation plan, representing your interests before the ATO, and negotiating a favourable resolution.
EKC Advisory provides expert guidance and support throughout the ATO Tax Negotiation process. Our team analyses your tax debt situation, develops tailored negotiation strategies, and represents your interests before the ATO to achieve the best possible outcome.
Customer Testimonials
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Thank you for expertly guiding us through the VA process. Never a pleasant experience for anyone, I’m sure, but you and your team kept us on track and got us through this. Shedding the baggage from all the mistakes made in the past will help us move forward. There’s a much brighter future ahead for us now.
Michael Pearson
Lead FX