On March 29th the JobKeeper scheme, came to an end. JobKeeper represented the largest direct stimulus the federal government provided Australia during the coronavirus pandemic with a total cost of $101billion over the 12-month period the scheme operated.

In tandem, changes were made to the Statutory Demand regime which reduced the effectiveness of the statutory demand process as a debt recovery tool, secured lenders such as banks provided moratoriums on financing facilities and further the Tax Office reduced its debt recovery actions.

As a result, many businesses were able to avoid entering a formal insolvency process, with total insolvencies for the last 12 months approximately 3,000 businesses under the historical average according to statistics released by the Australian Securities and Investments Commission.

As these various regimes come to an end it is appropriate for many businesses and their directors to undertake a health assessment of the business to understand its current position.

Undertake a Business Health Check
  1. Prepare a cashflow forecast/budget to assess the cashflow requirements of the business and potential cash burn over the next twelve months;
  2. Analyse all expenses associated with the business to identify any opportunities to reduce costs and promote increased profitability within the business;
  3. Review the creditor position of the business to ensure that all creditor accounts are maintained within required trade terms. An assessment should be made within the cashflow forecast to ensure that these outstanding creditors can be met from ongoing trading of the business;
  4. Examine all finance facilities within the business to ensure that these are fit for purposes and funding is available to meet any cash burn that is forecasted; and
  5. Consider the risks associated with the ongoing business, for example risks of snap lockdowns like those that occurred in Victoria and Queensland, further boarder closures or general economic downturn.
If your business is in trouble, what can you do?

 In the event that the business health check identifies concerns that the business is not going to be able to repay its creditors, finance facilities or meet any ongoing cash burn then immediate steps should be taken to understand the options available to the business and limit the potential personal liabilities that may arise of trading whilst insolvent. These options include:

  • Informal workout/restructure
  • Orderly winddown of the business
  • Voluntary Administration or Small Business Restructuring Plan
  • Members Voluntary Liquidation or Creditors Voluntary Liquidation

By understanding the options that are available to a business, you are able to make informed decisions to protect the business and your personal position.

Source: Chan & Naylor RRI is a Restructuring, Recovery and Insolvency practice specialising in corporate clients. Our partners have a wealth of experiencing in dealing with all forms of restructuring and insolvency matters from small family businesses to ASX listed entities. We pride ourselves in identifying the best solution for each of our clients to maximise the returns to their creditors. These solutions range from practicable informal restructuring solutions to formal insolvency appointments.

 To learn more about your options or to have an obligation free discussion please call the Chan & Naylor RRI team on 1300 904 946. Liam Bellamy is the Managing Partner of Chan & Naylor RRI.


General Advice Warning

The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.

Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.

Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Chan & Naylor, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.

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