Shaw Gidley - Insolvency and Reconstruction

The company had been trading for in excess of twenty five years as a manufacturer / retailer of bakery and pastry products. The company had a manufacturing plant and 13 retail outlets. The company had invested in new technology and expanded retail operations. Retail competition was fierce and margins slim. The directors of the company were served with penalty notices by the Commissioner of Taxation and were facing personal liability for significant tax debts. The company had cashflow and solvency problems.

What was done

• The directors appointed a voluntary administrator.
• By doing so within the 14 day period provided for in the penalty notices, the directors avoided becoming personally liable for the significant withholding taxes owing by the company.
• The business model was analysed.
• Operating costs were rationalised.
• The retail network was rationalised.
• Non performing product lines were rationalised
• The work force was restructured to improve productivity.
• The company’s legal entity was restructured.
• A new pricing strategy was developed,
• Creditors voted in favour of a Deed of Company Arrangement
• The DOCA effectively converted debt that was immediately due and payable to a long term debt.
• The DOCA allowed the company to make the changes required to return it to profitability.

The Results

The company is trading profitably and growing. The Directors are no longer personally exposed. Creditors are to receive 100 cents in the dollar.

Club Crisis

The Club had existed for more then twenty five years servicing a small community which otherwise had no access to a licensed community premises. The club industry was subject to difficult times with changing legislation, increasing competition for the entertainment dollar and changing consumer spending habits. Deteriorating premises and facilities, a declining member base and revenues lead to a winding up petition being served on the club, which it could not pay.

What was done

• The Board appointed a voluntary administrator to address the insolvency of the club and to provide the club with options.
• The Administrator engaged experts to prepare an operational plan.
• Operations were restructured in accordance with the plans recommendations.
• The club’s layout was improved.
• Operational expenditure was reduced.
• Rostering was improved.
• Community and member consultation was undertaken.
• Expressions of Interest were sought from other clubs looking to amalgamate.
• Refinance avenues were explored.
• A Deed of Company Arrangement was proposed.

The Result

The changes returned the Club to a break even trading position. Creditors voted favourably for the Deed of Company Arrangement allowing the Club to continue to trade. The moratorium afforded by the DOCA allowed the Club to explore a number of solutions to its predicament, ultimately finding a refinance solution which resulted in the club paying all creditors 100 cents in the dollar and having money available for capital investment.

Damages and the Debtor

The client was an individual who some years before had been involved in a motor accident and subsequently had received a significant unfavourable damages verdict which unfortunately was not covered by his insurances. The individual was married, with 3 dependents, a mortgage and job paying average income. The family was getting and was by no means wealthy. The unfavourable damages verdict placed the wellbeing of both the individuals and the family at significant risk as bankruptcy appeared certain. The family had endured several years of uncertainty due to the damages action.

What was done

• The debtor was referred to a registered Bankruptcy Trustee by a solicitor.
• The Trustee assessed the debtor’s affairs and recommended a Personal Insolvency Arrangement (Part X) be considered as an alternative to bankruptcy.
• The advice regarding the possible alternatives provided a great level of relief to the debtor and his family.
• An investigation was undertaken into the debtor’s financial affairs and the results reported to his creditors.
• The debtors obtained assistance from a family member by way of a lump sum contribution.
• A proposal was put to the debtor’s creditors.
• A meeting of the debtor’s creditors was held by postal ballot.

The Result

Creditors voted in favour of the debtor’s proposal. The debtor avoided bankruptcy and his family the hardship that would have followed. The debtor and his family have now put many years of concern and difficulties behind them and are getting on with life.

Steel Construction Struggling

The company was involved in metal fabrication and construction, had an established reputation, blue chip client base, efficient workforce, but aging plant. It had invested in new technologies, but with the view to offer new services. Unfortunately, the new services could not be made profitable. This coupled with several large bad debts over a 3 year period lead to a major cash flow crisis. Unable to keep taxes current, the Commissioner of Taxation served the directors with a penalty notice and commenced winding up proceedings.

What was done

• A voluntary administrator was appointed.
• Directors’ personal liability for the tax debt was avoided.
• The winding up petition was set aside.
• The business model was analysed and broken up into profit centres.
• Non profitable services were rationalised.
• Management was restructured.
• Governance was restructured.
• Cost reduction strategies were employed.
• An injection of working capital was secured.
• Credit and debt collection policy was reviewed and improved.
• Production processes were reviewed and productivity improved.
• The company embarked upon a detailed business plan.
• A Deed of Company Arrangement was proposed to creditors.

The Result

The company creditors voted in favour of the Deed of Company Arrangement. The company avoided liquidation. The Directors avoided personal liability for company withholding taxes. The company employed a more effective and efficient business model. Management developed and employed a business plan. The company has prospered and grown. Creditors are to receive 100 cents in the dollar.