Has Covid had an effect on your business?
As you know, COVID has had a significant but varying influence on business. Companies that were struggling before COVID have been handed a lifeline via the JobKeeper/Cash Flow Bonus and these benefits have created a perception the business is now better off than it was before. However, as these benefits dry up, the true reality of the business viability will come to light.
The Government initially offered a scenario where bank loan repayments and leases/rents were frozen, and further that any creditor wishing to pursue a debtor had to have a debt greater than $50,000 and had to give 6 months’ notice of intent to recover. One of the other big bonuses for directors during this period was the protection from insolvent trading during this period. The cut off for these benefits was originally 28 September 2020, however they have been extended to 31 December 2020.
Are you protected legally?
A recent article from ARITA suggests that the Directors protection from insolvent trading only applies if the Director places the company into some form of insolvency administration prior to the cut off date. Whilst it may be that the date will be extended, there is no guarantee, and therefore business owners need to consider where they stand.
Are you insolvent?
The Government recently announced a new insolvency regime, which will kick in when the current benefits cease. These new benefits (are still significantly short in detail) but are aimed at providing a streamlined ‘lowcost’ form of insolvency. Traditionally, the director looses control of the business and the Liquidator takes over. This new regime is set to allow the business owner to remain in control, maintain the business operations whilst the administrator works with the owner to develop a proposal to creditors. There are fixed fees, less bureaucracy (investigations, reporting and need for meetings) and a simplified dividend process. The Federal Budget due 6 October 2020 will likely provide more detail on how this process will work.
What do you need to do?
The bottom line is that business owners need to act now. Get the health of their business checked, to see whether they qualify for the streamlines process or what they have to do to become eligible, and even whether this option will work for them.
There are limited numbers of Liquidators and if the expected rush of > 230,000 businesses intend to access this service, those at the end of the que will suffer.
We are offering FREE BUSINESS ADVICE for a limited time.
It is our belief that these businesses need to act now. Consult with a Liquidator to discuss options and determine eligibility (or suitability) and get ahead of the pack. As of today, 6 October 2020, there is only 9 weeks (approx.) of work weeks until the end of the year. Time is running out for business owners to make informed decisions.
We suggest you contact us for a no obligation, free, confidential health assessment of your business.
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Andrew and his team do an excellent job of helping their clients with bankruptcy advice and it is a pleasure to work with him.
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