When a business is under financial pressure, delay can be costly. Not just financially, but strategically. The longer directors wait to get advice, the fewer options may be available to restructure, negotiate or turn the business around.
When a business is under financial pressure, delay can be costly. Not just financially, but strategically. The longer directors wait to get advice, the fewer options may be available to restructure, negotiate or turn the business around.
As Clement Teng, Director at O’Brien Palmer, explains: “Indecisiveness can lead to further delays and a diminishing of the options available for you to take on, to turn things around.”
That is something Clement is seeing regularly in the current market. Many directors know their business is under pressure, but they hesitate to act. Sometimes they are waiting for the ATO to respond. Sometimes they are hoping a payment plan will be approved. Sometimes they are simply overwhelmed and unsure which step to take next.
But waiting too long can create unnecessary risk.
Liquidation is not the only option
There is still a common misconception that speaking with a liquidator means the business is already finished. That is not always the case.
Clement is clear that there are often more options available than directors realise.
“There is still a bit of a taboo about who liquidators are and what they do… there’s a lot more options other than just liquidations in terms of how you want to restructure your businesses.”
One of those options may be a Small Business Restructure, commonly known as an SBR. An SBR can allow eligible directors to keep trading while a restructuring practitioner helps develop a plan to compromise the company’s debts with creditors.
The aim is to create a viable proposal that creditors may accept, allowing the business to reduce the pressure of debt and continue operating.
The pressure behind the numbers
Financial distress is never just about balance sheets and creditor reports. Behind every business are people.
Clement notes that many directors are lying awake at night worrying about whether they can retain staff, provide for their family, and keep the business alive. That is why early advice is so important. The goal is not simply to deal with debt. The goal is to understand the full picture and preserve as many options as possible.
A recent turnaround case
Clement shared a recent matter involving a company that had been actively negotiating with the ATO before OBP’s appointment. The directors were trying to enter into a viable payment plan and had provided financial information, including profit and loss and balance sheet figures.
However, the ATO was not prepared to accept the proposed payment plan. Because those discussions were ongoing, the directors held off considering an external administration appointment.
Unfortunately, by the time they appointed OBP as voluntary administrators, the company was only days away from its first wind-up hearing.
“They left it quite late… that did not happen until I think it was three or four days before the first wind-up hearing.”
OBP acted quickly. The team liaised with the ATO’s solicitors, secured an adjournment of the wind-up hearing, and worked with the directors on a Deed of Company Arrangement proposal, known as a DOCA.
That proposal was then put forward to creditors.
The result? “We managed to get a hundred percent approval rate from all creditors, including the ATO.”
That outcome helped avoid the company being wound up. It also protected the livelihood of people connected to the business.
For this particular business, the stakes were even higher. Some employees were sponsored by the company in relation to their visas, which meant the outcome could have impacted their right to remain in the country.
As Clement put it: “The aftermath would’ve been unimaginable, especially when it involved the livelihood of a number of people that has ties with the business.”
The earlier the conversation, the more options available
The message from Clement is simple: There are options, but options reduce when directors wait too long. Whether the pathway involves an SBR, voluntary administration, a DOCA, liquidation, informal negotiation or another strategy, getting advice early can make a significant difference.
O’Brien Palmer has been helping businesses for more than 30 years, and Clement’s message to directors is clear: “There are options and the team at O’Brien Palmer will more than equipped to provide that assistance when needed.”
Clement also provides multilingual support and speaks Mandarin, assisting a broad range of clients to understand and navigate financial distress.
If your company is facing financial pressure, tax debt, creditor action or uncertainty about what to do next, do not wait until a wind-up hearing is days away. Have the conversation early. It may be the difference between losing options and saving the business. Get in touch today.
Liam Bailey, Managing Partner
O’Brien Palmer
(61) 2 9232 3322
obp1@obp.com.au