by Goran Veljanoski

Voluntary Administrators were appointed to fashion chain Bardot last month on 28 November 2019 as the consumer sector continues to shrink.

Just ten days earlier, well known restaurant chain Crinitis also entered Voluntary Administration as the owners now attempt a restructure of the restaurants.

It looks like 2019 is set to end just as 2018 did, with evidence that even the big names are susceptible to the problems which plague small to medium businesses.

The administration of Criniti’s reminds us that all hospitality businesses are vulnerable to weakening in retail spending. Bardot’s CEO also attributes an oversaturated and “discount driven” market as contributing to the retailer’s demise. Meanwhile, economists will point out that reduced consumer spending is due to the soaring standard of living, record high mortgage debt and stagnant wage growth.

It is all too easy then to conclude that business failure is something that “just happens” to a company due to external factors.

The team at Veritas have seen many businesses fail, not due to external factors, not due to a poor product or service, but most often due to poor strategic management and insufficient capital. Statistics by ASIC confirm that these are the top two reasons for business failures across all Australia and all industries.

These causes are in-fact internal factors which can be avoided if one seeks the right advice. And often, the earlier advice is sought, the less costly it is for the business owner and the greater the chance that the business survives. This is because it is easier to identify and fix a small problem before it becomes a big problem. Taking action whilst your business is solvent will give you more options and more control as a business owner. Once a business becomes insolvent, an external administration becomes your only option.

The team at Veritas Advisory are equipped to handle a range of corporate services from business analytical services all the way to formal appointments. We can conduct a solvency review of your company and outline available options. These options may include refinancing, restructuring or changing your company’s activities, or even appointing an external administrator.

As appropriately qualified advisers, any advice we provide you could support a claim of "safe harbour", being one of the steps taken as part of an attempted turnaround. Safe harbour is protection for company directors from personal liability for insolvent trading in the event that their company goes into liquidation. The safe harbour laws commenced in September 2017 and give an opportunity for directors to turn around their financially distressed companies without risking personal liability under the insolvent trading provisions of the Corporations Act 2001. However, there are strict rules on how to take advantage of safe harbour provisions. Safe harbour is only available to directors who:

  1. Develop or take a course of action that, at the time, was reasonably likely to lead to a better outcome for the company than immediate administration or liquidation (the course of action that was developed must have been implemented within a reasonable period);
  2. Ensured that the company complied with its obligation to pay its employees (including their superannuation);
  3. Ensured that the company met its tax reporting obligations; and
  4. Meet their obligations to assist administrators, liquidators or controllers and provide them with the company’s books and records and Report on Company Activities and Property once the company entered external administration.

Don’t let small problems become big ones -- For a consultation on how our experts can assist you and your business, please get in touch with our office.

 

References

Sydney Morning Herald -- Popular women’s fashion brand Bardot enters voluntary administration
News.com.au -- Popular Aussie pizza chain Criniti’s has called in administrators and closed some sites for good.
Insolvency statistics: External administrators’ reports (July 2017 to June 2018)
Australian Restructuring Insolvency &Turnaround Association -- Safe Harbour

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