Case Studies

The owner of a large motor vehicle repair business rang me. He said he was in financial trouble and that he was about to lose his business, his home, and he and his wife would have to go bankrupt. I asked a half dozen questions and arranged to meet with them in a hour. Within an hour and a half of meeting them I put together a strategy to keep their business (although under a different structure), keep their home, and neither of them would have to go bankrupt. There was a price and that really was to work really hard for the next two years and get their business on track. The process wasn’t simple and there were a few bumps along the way but today they have a good business, their home and their piece of mind.

Note:Not all cases work out like this but these people sort advice from a good Insolvency Accountant who referred them to me and acted early so time wasn’t against us all the way.

Trucking Company 2

TG With the downturn in the world economy many industries have taken a hiding in Australia, although there are many industries doing very well. The trucking industry for small operators has had a pasting in the last couple of years. A north Queensland company with about ten trucks and associated trailers was one of them. When we first talked to the Director he could not see his way past bankruptcy. The director had just got through a nasty divorce and property settlement and he had health problems. There was a winding up application against the company and he really just wanted time to pay his creditors. The winding up applicant would not negotiate for a payment plan so we were forced to appoint an administrator to give us some time to put together a strategy to best get through the situation. We initially tidied up his balance sheet and were then able to see exactly where he stood. We looked at a Deed of Company Arrangement (DOCA) but could not get it to work. The director had another company which operated in a different area so this came into play. We put together an assets register and sold this along with the trucks and trailers to the other company. The old company was liquidated and in the end the creditors will receive very little for their troubles. The director sold his home and the banks were satisfied and he was able to put a small amount away into his new business to ensure that it was successful. Some of the creditors who were friendly with the director will be paid personally by the director.

The only ongoing issues were two trucks which were financed by way of a Chattel Mortgage. These cannot be assigned and will cause problems in the very near future. I advise my clients to NEVER purchase trucks in this way.

LESSON:           Treat your creditors like customers and when the going gets rough they will work with you. If you ignore them they will be forced to act against your company.

Trucking Company 3

PV A small trucking company south of the border with five trucks. The company was mismanaged and they got into debt. One of their creditors applied to wind them up and after talking to the director the only way out was to let the company go. We sold the assets to another company. This saved the director from bankruptcy as any shortfall in the sale price of the trucks were personally guaranteed by him.

LESSON:           Some people should remain small.

Food Industry

A sandwich making business had been losing money for some time. They were making close to 100,000 sandwiches per month. The directors had started small but had grown as the orders came in. The business really got away from them. They were not capable of running a business of that size and missed opportunities and lost business to reduce sales to about half the above figure. The administration was poor even though they had some good staff.

They had been able to keep ahead of most of their creditors but had ignored the ATO. The directors sort the advice of an Insolvency Practitioner who suggested that they try to sell the business and if they could not in a short time they should shut down and advised STRONGLY to look out for a Directors Penalty Notice. The Directors Penalty Notice came a couple of months later and the directors contacted the Insolvency Practitioner. We were called in. We took over negotiations with an interested party and had the assets valued and sold off to the buyer on day 13 of the Directors Penalty Notice.

The buyer bought a business that was losing money but had the potential to return a profit as they had the skills to manage it. They had to take over the equipment leases which they were not happy to do but if they had not the directors would be left with that debt. The directors were left with some credit card debts (which is normal) but not the massive equipment lease debt and the Directors Penalty Notice.

Bankruptcy 1

A young guy who owned a unit had an argument with his body corporate. There were several phone calls between him and the body corporate but he felt that he had been “ripped off” by them so eventually stopped talking to them or reading any of their mail. They eventually bankrupted him. He came to us for help. He had a mortgage on his unit and another small loan with the bank. The bank just wanted to get paid out and wanted nothing to do with our client even though his loan to value ratio was very low and his account was always up to date. The Trustee in Bankruptcy was extremely reasonable and was happy to work with us.

We arranged a new loan to buy out the bank for both loans, pay the trustee for his services, pay out the petitioning creditor (the body corporate) and his legals and several other creditors. A lot of transactions took place at settlement but the deal went through.

We applied under Section 153A of the Corporations Act to have the bankruptcy annulled. Section 153A is very similar to Section 73 except all debts are paid in full.

The debt to the body corporate was not large however the exercise cost our client about $40,000.