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COVID-19 Insolvency Relief ending on December 31st

COVID-19 Insolvency Relief ending on December 31st

As suppliers and creditors, there is nothing more frustrating than chasing your customer for payment of goods or services you have provided in good faith and then receiving notification from an insolvency practitioner that they have been placed into Receivership, Voluntary Administration or Liquidation. The temporary COVID-19 relief measures announced by the Government on the 25th of March 2020 which were extended to 31st of December 2020 made the recovery of debts even more difficult.

The good news for many is that the Australian Government announced major proposed insolvency law reforms to commence on the 1st of January 2021, which will include two new insolvency procedures for small businesses which have liabilities of less than $1 million.

The new insolvency process will be known as:

(1) Small Business Restructuring Proposal (SBRP); and
(2) Simplified Liquidation.

Small Business Restructuring Proposal

The SBRP involves a small business restructuring practitioner, who is a registered Liquidator, working with the business for 20 days to develop a restructuring plan. During this time, all creditors are notified and prohibited from taking any action against the company or enforcing guarantees against directors or relatives. The plan will then be sent to creditors, who are given 15 days to vote on the plan. Where the plan is approved, secured creditors will be bound by the plan to the extent that their debt exceeds the value of their security. However, if the plan is vetoed, the company will be placed in Voluntary Administration or the new proposed streamlined liquidation.

Eligibility for the SBRP includes:

(1) The business must be incorporated, not a sole trader; and
(2) Its liabilities must not exceed $1m.

Small Business Liquidation

Simplified liquidation will generally be the same as before, however with some cost savings such as:

● Lesser possibility of a liquidator seeking to clawback unfair preference payments from a creditor who is not related to the company;
● Certain requirements to call creditor meetings and forming committees of inspection are removed;
● The dividend process and proof of debt is simplified;
● Technology use will be maximised in voting and other communications.

Creditor rights and safeguards during Small Business Liquidation

The legal rights afforded to creditors such as employees will not change. Safeguards will be included to prevent companies from using the process to undertake corporate misconduct such as illegal phoenix activity.

As can be seen from the above there are many new and complex issues suppliers and creditors will need to address in the future.

However, if you have any questions or require assistance in dealing with your debtors, customers, financiers or suppliers, please do not hesitate in contacting Australian Company Liquidations on 1800 731 155. We are registered company liquidators who offer free expert advice 24/7 to help you with your financial issues.

Safe Harbour Provisions (Insolvent Trading) – What Directors Need To Know

Safe Harbour Provisions (Insolvent Trading) – What Directors Need To Know

Background

In response to the COVID-19 pandemic, the Federal Government announced a Safe Harbour amendment to the Corporations Act 2001 (Cth) (Corporations Act) to provide temporary relief measures for financially distressed businesses. Effective from 25 March 2020, the amendment protects directors from being personally liable for debts incurred during insolvent trading if the debt was incurred:

a. in the ordinary course of the company’s business;
b. during the six-month period (or any extension of the period);
c. before the appointment of the administrator or liquidator (during those periods).

The exact section is set out here.

On 7 September 2020, the six-month period was extended until 31 December 2020 as released in this statement by the Government.

Alert for directors

It has come to our attention that there is one essential aspect of the amendment which directors need to be aware of.

That is, in order for the relief to apply the company needs to appoint an external administrator or liquidator before 31 December 2020.

This means that there are no protections for insolvent trading if the company is placed in administration or liquidation after 31 December 2020 (being the end of the relief period as currently set by the government).

Directors then need to place their company in administration or liquidation BEFORE 31 December 2020 to receive protections for insolvent trading.

During these uncertain times, stay informed on the latest updates by subscribing to our newsletter. If your business is struggling from the impact of the pandemic or is looking for more information on company liquidations, please contact Australian Company Liquidations on 1800 731 155. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking expert advice.

Safe Harbour Amendments – What Advisers Need To Know

Safe Harbour Provisions (insolvent trading) – What Advisers Need To Know

Background

In response to the COVID-19 pandemic, the Federal Government announced a Safe Harbour amendment to the Corporations Act 2001 (Cth) (Corporations Act) to provide temporary relief measures for financially distressed businesses. Effective from 25 March 2020, the amendment protects directors from being personally liable for debts incurred during insolvent trading if the debt was incurred:

a. in the ordinary course of the company’s business;
b. during the six-month period (or any extension of the period);
c. before the appointment of the administrator or liquidator (during those periods).

The exact section is set out here.

On 7 September 2020, the six-month period was extended until 31 December 2020 as released in this statement by the Government.

Alert for advisers to directors

It has come to our attention that there is one essential aspect of the amendment which advisers need to be aware of.

That is, in order for the relief to apply the company needs to appoint an external administrator or liquidator before 31 December 2020.

This means that there are NO protections for insolvent trading if the company is placed in administration or liquidation after 31 December 2020 (the end of the relief period currently).

Advisers then need to instruct directors to place their company in administration or liquidation BEFORE 31 December 2020 to receive protections for insolvent trading.

During these uncertain times, stay informed on the latest updates by subscribing to our newsletter. If your business is struggling from the impact of the pandemic or is looking for more information on company liquidations, please contact Australian Company Liquidations on 1800 731 155. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking expert advice.

How to Close Down your Company and Appoint a Liquidator

Closing down your company can be a stressful time. If your company cannot afford to repay its debts, it is most likely insolvent. As a director, you have an obligation under the law not to incur any further debts when your company is insolvent and you may wish to consider winding it up and appointing a liquidator.

Liquidation

If your company is insolvent, liquidating the company means your business stops operating and a liquidator is appointed either by the shareholders or by court order. The liquidator’s role is to preside over the orderly winding up of the company.

The liquidator will oversee that there is a fair and equitable distribution of the company’s assets (which must be in accordance with the Corporations Act). The liquidator will investigate the affairs of the company to ensure that no creditor has received any unfair advantages over other creditors (such as received an unfair preference).

The liquidator will record the appointment with ASIC. As a director you will still need to fully co-operate with the liquidator and provide all necessary assistance such as delivering the company’s books and records to the liquidator.

Seeking advice from company liquidation experts can ease this stressful process and help prevent unwanted legal surprises.

If you are company director and you are considering a company liquidation, then call Australian Company Liquidations for free and confidential advice.  We operate a 24 hour insolvency hotline. Call now on 1800 731 155.

 

How COVID-19 Insolvency Relief Laws Have Impacted Insolvency and Winding Up Applications

The number of insolvencies and winding up applications in Australia have drastically decreased since the introduction of the temporary relief laws to combat the impact of the COVID-19 crisis on businesses.

When comparing July to August 2020 and July to August 2019, winding up applications to ATO have gone down by 89% and court liquidations down by 74%. Similarly, we see that Voluntary Administrations are also down 62% and Voluntary Liquidations by 37%. This has been consistent with ATO’s sympathetic approach to focusing on business support measures rather than recovery procedures.

In August 2020 we also saw a total of 382 formal appointments throughout Australia for Voluntary Liquidation, Court Liquidation and Voluntary Administration. The majority of applications were attributed to New South Wales (188), Victoria (78) and Queensland (58).

Whilst a total of 19 winding up applications were filed with the Court in August 2020, the ATO did not file any winding up applications in July or August 2020. These numbers have remained relatively consistent since the relief laws came into effect, with only a total of seven court applications received by the ATO in April 2020.

Although the ATO has softened its approach within a COVID-19 environment, we may see these trends coming to an end when these relief measures start winding back. Once the temporary insolvency relief measures come to an end many businesses will have to face the harsh reality of dealing with residual debts and the threat of being wound up if they are no longer viable due to the pandemic.

If you would like more information on company liquidations or would like the right advice for dealing with insolvency then please contact Australian Company Liquidations. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking expert advice. Please call us on 1800 731 155 now.

Corporate Collapses Under the Strain of the COVID-19 Pandemic

With the impact and duration of the pandemic stretching beyond everyone’s expectations, we have witnessed the rise and fall of many corporations and those entering administration and even liquidation. Below are some examples, highlighting major corporations that have undergone the strain of the COVID-19 pandemic.

Virgin Australia Group, perhaps one of the most high profile COVID-19 victims were placed into administration in April 2020 due to the pandemic restriction but had been struggling before the pandemic.

Carriageworks, considered to be Sydney’s cultural centre and believed to be the largest contemporary multi-arts centre in Australia was placed in administration in May but was saved from liquidation in July.

However, the sector that took the biggest hit without a doubt was the retail industry. Unable to withstand online and overseas competitors the pandemic fast-tracked many of the issues this sector was already faced with before the pandemic. Some examples of corporations undergoing administration (before and during Coronavirus) include Victoria’s Secret (the UK branch) in early June, Colette by Colette Hayman in February, and major Australian swimwear brand Seafolly in June.

If your business is still struggling from the impact of the pandemic or is looking for more information on company liquidations, then please contact Australian Company Liquidations. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking expert advice. Please call us on 1800 731 155 now.

The New Age of Agile Marketing Accelerated by COVID-19

The Coronavirus Pandemic has rapidly changed consumers, the economy and people’s behaviours. This means that businesses require a more resilient and fluid marketing approach that is able to adapt to the rapid changes we are currently facing every day. Increasingly, businesses are adopting an agile marketing approach as a response to these market conditions.

With the pandemic accelerating this agile marketing transformation across the industry, those that fail to do so may get left behind. The reality is that digitalisation is the next step forward, and becoming one of the only ways for businesses to survive. Many businesses are also opting for more cross-functional teams to break down barriers between different teams and increase versatility within the company.
At its core, agile marketing is taking on a customer-centric approach, putting the customer and their buying processes first.

Here are some examples of agile marketing where marketers have adapted their approach to the pandemic:

  • Automotive marketers such as Ford offering payment relief to those affected by COVID-19.
  • McDonald’s selling essential groceries such as bread, milk and eggs that can be picked up alongside their contactless drive-thru or takeaway order.
  • Local family restaurants implementing delivery have decided to keep it as a permanent service in their business.

If your business is struggling to adapt to the new way of life with the changes caused by COVID-19 or is looking for a fresh start for your business then please contact Australian Company Liquidations. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking free, confidential advice to businesses still recovering from the impact of the pandemic or looking to restructure their business. Please call us on 1800 731 155 now.

Adapting your business during the Coronavirus recovery period

With the pandemic receding and government restrictions loosening up, businesses are moving closer to ‘returning back to normal’. However, whilst everyone may be eager to get back to business as usual, the unpredictable and long-lasting impact following this pandemic means that businesses must be prepared for the new opportunities and risks when reopening.

Here are some key areas to consider when adapting your business during the coronavirus recovery period:

Financial Planning

This includes addressing short-term liquidity challenges as well as the costs (and profits to be generated) when considering building new resources to seize new opportunities. It is important to understand costs incurred or saved by bringing people back to work or to be able to plan for fluctuations in business demand through the COVID-19 recovery period.

Safe workplaces

Due to the changes in health and safety put in place by local, state and federal laws and guidelines, transitioning back to work will require careful preparation. It is important to establish and revisit current medical, health and emergency protocols before resuming workers previously on standby or transitioning from back to the workplace from previously working digitally.

Agile Marketing

The pandemic has not only changed the economy but also changed consumer and behaviours. It is important to understand and tailor your marketing strategy to these changes by understanding these trends early.

You may be looking for a fresh start for your business but are still recovering from the impact the pandemic has had on your business. If you would like more information on how to overcome these challenges concerning insolvency and financial instability then please contact Australian Company Liquidations. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking free, confidential advice. Please call us on 1800 731 155 now.

Managing cash flow during COVID-19

With the Covid-19 outbreak impacting the global economy and the ability of businesses to carry out their usual operations, maintaining control on your cash flow becomes crucial to the survival of your business. Below are some tips to help stay on top of your company’s cash flow and improve your positive cash flow:

  1. Prepare a cash flow forecast

We recommend you prepare a 3 month cash flow. Trying to forecast longer than 3 months may be too difficult. This will help you make informed financial decisions so you can hopefully avoid cash flow shortages.

  1. Improving your cash inflow

Improving positive cash flow by increasing your income or decreasing your expenses will help the chances of avoiding cash flow shortages. Increasing income during the COVID19 pandemic will be challenging but if you have old stock which can be discounted, that might be a good way to help boost cash flow in the short-term. Some other measures might be to offer a discount on some of your debtors, to encourage them to pay quickly.

  1. Reducing unnecessary expenditure (cash outflow)

The next best way to improve cash flow, would be carefully review your business cost base to see if you reduce any expenses, especially non-essential expenses. If you critically analyze your cost base, you might be able to save more money than you first thought.

Maybe you can reduce your workforce or cut back the working hours of your employees. You should also apply for the jobkeeper assistance from the Australian government.

  1. Put your business into hibernation

Some businesses have been forced into hibernation during the COVID19 pandemic. If you are unable to operate during the COVID19 pandemic then putting your business into hibernation might be best to preserve your business.

We understand that everyone is going through a tough time and are committed to helping businesses overcome challenges concerning cash flow and insolvency. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking free, confidential advice. Please call us on 1800 731 155 now.

Safe Harbour as temporary relief during COVID-19 (Coronavirus)

With COVID-19 causing major disruptions to businesses and impacting the economy as a whole, businesses are faced with many unforeseen challenges. At times of financial distress you may be finding it tough navigating through difficult financial situations.

You may be worried about your duties as a director or business owner. According to the Corporations Act 2001 directors have the duty to prevent the company from incurring further debts once the company is insolvent, and if you fail to do so you will be become personally liable for the debts incurred.

Some good news is that Australia’s ‘Safe Harbour’ laws are designed to protect directors that attempt to do the right thing and lawfully turn around their company, even if the plan fails and the company later go into liquidation. If you would like more information on ‘Safe Harbor’ laws please click here.

On 25th March 2020 the Coronavirus Economic Response Package Omnibus Bill 2020 came into effect, granting temporary relief for financially distressed businesses. This included providing an additional ‘Safe Harbour’ for businesses for the next six months. This means that you will not be liable for any insolvent trading from the period 25 March 2020 to 25 September 2020.

If you would like to learn more about the ‘Safe Harbour’ provisions and changes to legislation that may impact your business please contact us. We understand that everyone is going through tough times and we are committed to helping businesses overcome challenges concerning insolvency and financial instability. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking free, confidential advice. Please call us on 1800 731 155 now.