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Voluntary Administration - Security Company Case Study

An 85% reduction in debt gets company through a major trading and cash flow problem

An electronic security company in Brisbane with clients ranging from small boutiques to international mega-corporations within Australia was experiencing difficulty with their cash flow, so Mackay Goodwin stepped in to help.

At a base level, the security company provides physical hardware (such as cameras and CCTV), security expertise/monitoring and consultancy to clients, and customised solutions for those who require it.

The high-calibre profiles of the companies represented would have increased the security challenges for any company. For this particular security company, the sheer magnitude of size for the companies of those contracts ultimately led them into incurring significant working capital difficulties, largely formed by insufficiently detailed terms and deliverables combined with timeline blowout, which ultimately formed an unsustainable pattern of loss.

After a time, the company declared insolvency. Continued difficulties had led them to be unable to sufficiently contribute their taxes, and they owed over $2 million to unsecured creditors (as well as almost $400,000 in employee entitlements, including annual leave payments and outstanding employee superannuation contributions). This, in turn, led to suppliers refusing to provide credit, which forced them deeper into financial difficulties.

Under Section 588G of the Corporations Act 2001, directors can be held personally liable if they knowingly allow a company to continue trading whilst insolvent. The only remaining course for the directors was to appoint a Voluntary Administrator to oversee the process and attempt to provide any chance of saving the company, as well as securing debts.

Mackay Goodwin was contacted, and immediately begun the moratorium process for Voluntary Administration. We focused upon beginning smaller, more secure, more detailed, and ultimately more profitable contracts in order to build up sufficient resources to handle both large and small companies.

Voluntary Administration can in the business world sometimes carry stigma about it, but oftentimes a company needs restructuring in order to stabilise before it readjusts position in order to build towards financial stability. This process takes between 1-2 months in most cases, during which trading continues normally.

As part of the Voluntary Administration process, a Deed of Company Arrangement (DOCA) was entered into for the security company. A DOCA is an agreement between a company and the creditors that it owes money to, outlining the division of debts, and any potential assets that may be used to repay them. The reason a bipartisan Administrator is appointed for this is that the agreement is best served - both for each company and the reputation of the insolvent group - as a way to find an adequate solution for all parties, rather than just the creditor or debtor.

In this case, the DOCA maintained full compensation for employee entitlements and superannuation, 6-22 cents per dollar to creditors, and was able to reduce 85% of overall debt. This allowed Kudos to maintain trading, and they’re now in a position of further expansion.

The security company director said that their experience with Mackay Goodwin and the Voluntary Administration process was the best option for the business, as it allowed them to continue to grow. They’re very glad they decided to go with this option.

Voluntary Administration - Earthmoving Company Case Study

75% reduction in tax debt gets this earthmoving company moving again

By the time a Melbourne-based earthmoving company contacted Mackay Goodwin over reducing their accrued debt, they had build up a $280,000 backlog with the Australian Taxation Office (ATO). The company, which specialises in earthmoving and concrete for swimming pools, were discussing possible options and drawing a blank.

After a consultation process, the company agreed with our assertion that the best way to reduce their overall debt was to put themselves into Voluntary Administration. Through us, they appointed an administrator to oversee the division of debts and their repayment in a bipartisan manner, in order to reach an accord that would allow the company to continue functioning.

Voluntary Administration consists largely of a 4-5 week moratorium. The company can trade as usual, but the administrator conducts additional reviews and examines the best potential way to pay off as much of their debt as possible, ranging from incremental changes to be applied over time to large-scale restructuring.

The main issue we determined to be present was that of cash flow, and so when detailing a Deed of Company Arrangement with the ATO, we reached an agreement to pay 25 cents in the dollar over 12 months to allow the company to both resume trading efficiently and allow payback of debts on a fixed timeline.

A Deed of Company Arrangement (DOCA) is a legally binding agreement between a company and creditors, created by the bipartisan administrator with the aim of pleasing all parties involved, as well as keeping the insolvent company operating. If this isn’t possible, they at least attempt to keep creditors more secure than if their debtor was wound up. The ATO is historically lenient enough with tax debts to allow exceptions for the purposes of debt reduction over time, but has also been increasingly active in legal proceedings, so a formal accord in the form of a DOCA was a potential best-case scenario for the company.

The ATO will generally accept these only if it would favour them better than a simple declaration of bankruptcy or liquidation. This usually occurs if the ATO also considers the company historically compliant and the proposal sound, and this criteria was applicable to the company. For this reason, a DOCA was granted by the ATO.

On top of the DOCA, Mackay Goodwin worked with the directors to stabilise their business structure, helping with restoring their working capital, and restructuring their business management and cost structures.

This involved:

• Improving business management - identifying areas where efficiencies could be achieved including ways to reduce costs, grow revenue and improve accounting practices.
• Improving the management of working capital – identifying ways to better manage inventories and accounts payable, and improving accounts receivable processes (i.e. creating an [A/R] ageing report to track and measure the payment status of all customers, offering payment plans and early payment discounts etc).
• Analysing the company’s cost structure - classifying expenses as either fixed or variable in order to better understand the profitability of the business.

The earthmoving company is now trading from strength to strength and the director of the company had nothing but praise for Mackay Goodwin and the Voluntary Administration process. They gave a big thank you to the Mackay Goodwin administration team that assisted with them getting their business back on its feet.

Voluntary Administration - Building Developer Case Study

This South Australian builder continues to trade, thanks to a DOCA, restructure and dispute resolution

When an Adelaide building development company found itself in a lengthy and protracted legal dispute over a costly project, it found itself unable to trade out of the heavy losses it had incurred as a result of the deal.

The company had multiple ventures and millions of dollars tied within a grouping of properties, which they now discovered they had no direct ownership over due to undocumented agreements with external parties.

Despite the Supreme Court ruling in the favor of the company, the news was too little and too late. They had accrued $6 million total in debt, with no concrete way of paying them back. In order to ensure the continued survival of the company, the repayment of all unsecured creditors (including dozens of subcontractors and suppliers) and to ensure that he would keep his builder’s license, the director agreed to place the company into Voluntary Administration with Mackay Goodwin.

While this left clients without homes still under construction, and placed some employees in a position of unemployment, this action was deemed necessary in order to protect the existing debt and make sure operations could resume.

A Voluntary Administration moratorium is a brief period of time, usually between one and two months, where an appointed bipartisan administrator attempts to secure debt in the best interests of all parties involved, both debtor and creditor.

The company was allowed to remain trading during the time, and at the end of it we determined that a Deed of Company Arrangement (DOCA) should be entered into between the company and its creditors. Under this agreement, unsecured creditors would receive between 40 and 50 cents to the dollar over the period of several months, a figure far exceeding that which they would have received if the company would have gone bankrupt or wound up.

A moratorium is a multi-stage process. Firstly, the administrator seeks strategies that would attempt to improve the overall stability of the company; this can include minor changes or entire restructuring of assets.

After this has been completed, creditors are met and their demands cycled through in such a way to maximise benefit for all affected parties. Once an accord has been reached, control of the company is handed back over to the Director.

Mackay Goodwin achieved considerable success, securing 40-50c to the dollar for unsecured creditors, full return for those secured creditors affected, and left the company in a position to re-hire priority employees while keeping their builder’s license.

Today the building development company is continuing to trade successfully thanks to its Voluntary Administration intervention. The director stated that he and the company were very appreciative of the administration team and what they helped the company to achieve through the process.

Voluntary Administration - Medical Recruitment Firm Case Study

Debtor finance and a tax debt payment plan helped this medical recruitment firm achieve a much stronger business model

This NSW-based firm performs medical recruitment and temporary locum for a range of medical personnel across Australia, including doctors, nurses, allied health, and dental. A large amount of their work additionally stems from recruiting and deploying medical professionals to remote and rural Australia, as well as FIFO medical staff for the energy and mining sectors.

Despite this, a chain of late-paying debtors (in the range of 2-3 months) and subsequent debts with the Australian Tax Office had left them in a position that was severely impacting their ability to trade due to a limited cash flow.

One of the company directors then contacted Mackay Goodwin and, after a brief consultation period, it was decided that Voluntary Administration would be the correct choice of action for the company.

A VA moratorium involves the temporary appointment of an Administrator to the head of the company, where they are responsible for determining the best course of action for two things: first, the longevity of the company and the potential for them to resume trading as soon as possible, and secondly to sort as good of a deal as possible for both the debt-owing company and their creditors alike.

The process takes usually around 1-2 months, and in that time Mackay Goodwin generated a Deed of Company Arrangement (DOCA) with the ATO on behalf of the company. This is a legally-binding agreement written with the same aims as the Administration process, and with which the ATO has historically been open to -- that is, if they believe it would be better for the Commonwealth through a combination of repayments and continued lifespan for the company rather than bankruptcy and liquidation.

In this case, the ATO looked to a few other factors. The company’s strong performance and history of compliance factored in, as well as their ability to make arrangements regarding their continual financial stability and ability to repay their creditors.

As a result of this acceptance, Mackay Goodwin were able to repay the ATO a significantly reduced, interest-free debt over three years while allowing the medical recruitment firm to remain trading, albeit with a Debtor/Invoice Finance company that would allow them to alleviate their cash flow issues and bring them into a position of stability.

The firm remains in operation to this day stronger than ever, and continues to use that same Debtor Finance facility. A director of the firm gave his opinion that the voluntary administration process implemented by Mackay Goodwin allowed the company to continue trading, and allow them to keep their company.

Voluntary Administration - Earthmoving Company Case Study

75% reduction in tax debt gets this earthmoving company moving again

By the time a Melbourne-based earthmoving company contacted Mackay Goodwin over reducing their accrued debt, they had build up a $280,000 backlog with the Australian Taxation Office (ATO). The company, which specialises in earthmoving and concrete for swimming pools, were discussing possible options and drawing a blank.

After a consultation process, the company agreed with our assertion that the best way to reduce their overall debt was to put themselves into Voluntary Administration. Through us, they appointed an administrator to oversee the division of debts and their repayment in a bipartisan manner, in order to reach an accord that would allow the company to continue functioning.

Voluntary Administration consists largely of a 4-5 week moratorium. The company can trade as usual, but the administrator conducts additional reviews and examines the best potential way to pay off as much of their debt as possible, ranging from incremental changes to be applied over time to large-scale restructuring.

The main issue we determined to be present was that of cash flow, and so when detailing a Deed of Company Arrangement with the ATO, we reached an agreement to pay 25 cents in the dollar over 12 months to allow the company to both resume trading efficiently and allow payback of debts on a fixed timeline.

A Deed of Company Arrangement (DOCA) is a legally binding agreement between a company and creditors, created by the bipartisan administrator with the aim of pleasing all parties involved, as well as keeping the insolvent company operating. If this isn’t possible, they at least attempt to keep creditors more secure than if their debtor was wound up. The ATO is historically lenient enough with tax debts to allow exceptions for the purposes of debt reduction over time, but has also been increasingly active in legal proceedings, so a formal accord in the form of a DOCA was a potential best-case scenario for the company.

The ATO will generally accept these only if it would favour them better than a simple declaration of bankruptcy or liquidation. This usually occurs if the ATO also considers the company historically compliant and the proposal sound, and this criteria was applicable to the company. For this reason, a DOCA was granted by the ATO.

On top of the DOCA, Mackay Goodwin worked with the directors to stabilise their business structure, helping with restoring their working capital, and restructuring their business management and cost structures.

This involved:

• Improving business management - identifying areas where efficiencies could be achieved including ways to reduce costs, grow revenue and improve accounting practices.
• Improving the management of working capital – identifying ways to better manage inventories and accounts payable, and improving accounts receivable processes (i.e. creating an [A/R] ageing report to track and measure the payment status of all customers, offering payment plans and early payment discounts etc).
• Analysing the company’s cost structure - classifying expenses as either fixed or variable in order to better understand the profitability of the business.

The earthmoving company is now trading from strength to strength and the director of the company had nothing but praise for Mackay Goodwin and the Voluntary Administration process. They gave a big thank you to the Mackay Goodwin administration team that assisted with them getting their business back on its feet.

Voluntary Administration - Building Developer Case Study

This South Australian builder continues to trade, thanks to a DOCA, restructure and dispute resolution

When an Adelaide building development company found itself in a lengthy and protracted legal dispute over a costly project, it found itself unable to trade out of the heavy losses it had incurred as a result of the deal.

The company had multiple ventures and millions of dollars tied within a grouping of properties, which they now discovered they had no direct ownership over due to undocumented agreements with external parties.

Despite the Supreme Court ruling in the favor of the company, the news was too little and too late. They had accrued $6 million total in debt, with no concrete way of paying them back. In order to ensure the continued survival of the company, the repayment of all unsecured creditors (including dozens of subcontractors and suppliers) and to ensure that he would keep his builder’s license, the director agreed to place the company into Voluntary Administration with Mackay Goodwin.

While this left clients without homes still under construction, and placed some employees in a position of unemployment, this action was deemed necessary in order to protect the existing debt and make sure operations could resume.

A Voluntary Administration moratorium is a brief period of time, usually between one and two months, where an appointed bipartisan administrator attempts to secure debt in the best interests of all parties involved, both debtor and creditor.

The company was allowed to remain trading during the time, and at the end of it we determined that a Deed of Company Arrangement (DOCA) should be entered into between the company and its creditors. Under this agreement, unsecured creditors would receive between 40 and 50 cents to the dollar over the period of several months, a figure far exceeding that which they would have received if the company would have gone bankrupt or wound up.

A moratorium is a multi-stage process. Firstly, the administrator seeks strategies that would attempt to improve the overall stability of the company; this can include minor changes or entire restructuring of assets.

After this has been completed, creditors are met and their demands cycled through in such a way to maximise benefit for all affected parties. Once an accord has been reached, control of the company is handed back over to the Director.

Mackay Goodwin achieved considerable success, securing 40-50c to the dollar for unsecured creditors, full return for those secured creditors affected, and left the company in a position to re-hire priority employees while keeping their builder’s license.

Today the building development company is continuing to trade successfully thanks to its Voluntary Administration intervention. The director stated that he and the company were very appreciative of the administration team and what they helped the company to achieve through the process.

Voluntary Administration - Medical Recruitment Firm Case Study

Debtor finance and a tax debt payment plan helped this medical recruitment firm achieve a much stronger business model

This NSW-based firm performs medical recruitment and temporary locum for a range of medical personnel across Australia, including doctors, nurses, allied health, and dental. A large amount of their work additionally stems from recruiting and deploying medical professionals to remote and rural Australia, as well as FIFO medical staff for the energy and mining sectors.

Despite this, a chain of late-paying debtors (in the range of 2-3 months) and subsequent debts with the Australian Tax Office had left them in a position that was severely impacting their ability to trade due to a limited cash flow.

One of the company directors then contacted Mackay Goodwin and, after a brief consultation period, it was decided that Voluntary Administration would be the correct choice of action for the company.

A VA moratorium involves the temporary appointment of an Administrator to the head of the company, where they are responsible for determining the best course of action for two things: first, the longevity of the company and the potential for them to resume trading as soon as possible, and secondly to sort as good of a deal as possible for both the debt-owing company and their creditors alike.

The process takes usually around 1-2 months, and in that time Mackay Goodwin generated a Deed of Company Arrangement (DOCA) with the ATO on behalf of the company. This is a legally-binding agreement written with the same aims as the Administration process, and with which the ATO has historically been open to -- that is, if they believe it would be better for the Commonwealth through a combination of repayments and continued lifespan for the company rather than bankruptcy and liquidation.

In this case, the ATO looked to a few other factors. The company’s strong performance and history of compliance factored in, as well as their ability to make arrangements regarding their continual financial stability and ability to repay their creditors.

As a result of this acceptance, Mackay Goodwin were able to repay the ATO a significantly reduced, interest-free debt over three years while allowing the medical recruitment firm to remain trading, albeit with a Debtor/Invoice Finance company that would allow them to alleviate their cash flow issues and bring them into a position of stability.

The firm remains in operation to this day stronger than ever, and continues to use that same Debtor Finance facility. A director of the firm gave his opinion that the voluntary administration process implemented by Mackay Goodwin allowed the company to continue trading, and allow them to keep their company.

Voluntary Administration - Security Company Case Study

An 85% reduction in debt gets company through a major trading and cash flow problem

An electronic security company in Brisbane with clients ranging from small boutiques to international mega-corporations within Australia was experiencing difficulty with their cash flow, so Mackay Goodwin stepped in to help.

At a base level, the security company provides physical hardware (such as cameras and CCTV), security expertise/monitoring and consultancy to clients, and customised solutions for those who require it.

The high-calibre profiles of the companies represented would have increased the security challenges for any company. For this particular security company, the sheer magnitude of size for the companies of those contracts ultimately led them into incurring significant working capital difficulties, largely formed by insufficiently detailed terms and deliverables combined with timeline blowout, which ultimately formed an unsustainable pattern of loss.

After a time, the company declared insolvency. Continued difficulties had led them to be unable to sufficiently contribute their taxes, and they owed over $2 million to unsecured creditors (as well as almost $400,000 in employee entitlements, including annual leave payments and outstanding employee superannuation contributions). This, in turn, led to suppliers refusing to provide credit, which forced them deeper into financial difficulties.

Under Section 588G of the Corporations Act 2001, directors can be held personally liable if they knowingly allow a company to continue trading whilst insolvent. The only remaining course for the directors was to appoint a Voluntary Administrator to oversee the process and attempt to provide any chance of saving the company, as well as securing debts.

Mackay Goodwin was contacted, and immediately begun the moratorium process for Voluntary Administration. We focused upon beginning smaller, more secure, more detailed, and ultimately more profitable contracts in order to build up sufficient resources to handle both large and small companies.

Voluntary Administration can in the business world sometimes carry stigma about it, but oftentimes a company needs restructuring in order to stabilise before it readjusts position in order to build towards financial stability. This process takes between 1-2 months in most cases, during which trading continues normally.

As part of the Voluntary Administration process, a Deed of Company Arrangement (DOCA) was entered into for the security company. A DOCA is an agreement between a company and the creditors that it owes money to, outlining the division of debts, and any potential assets that may be used to repay them. The reason a bipartisan Administrator is appointed for this is that the agreement is best served - both for each company and the reputation of the insolvent group - as a way to find an adequate solution for all parties, rather than just the creditor or debtor.

In this case, the DOCA maintained full compensation for employee entitlements and superannuation, 6-22 cents per dollar to creditors, and was able to reduce 85% of overall debt. This allowed Kudos to maintain trading, and they’re now in a position of further expansion.

The security company director said that their experience with Mackay Goodwin and the Voluntary Administration process was the best option for the business, as it allowed them to continue to grow. They’re very glad they decided to go with this option.

Voluntary Administration - Building Developer Case Study

This South Australian builder continues to trade, thanks to a DOCA, restructure and dispute resolution

When an Adelaide building development company found itself in a lengthy and protracted legal dispute over a costly project, it found itself unable to trade out of the heavy losses it had incurred as a result of the deal.

The company had multiple ventures and millions of dollars tied within a grouping of properties, which they now discovered they had no direct ownership over due to undocumented agreements with external parties.

Despite the Supreme Court ruling in the favor of the company, the news was too little and too late. They had accrued $6 million total in debt, with no concrete way of paying them back. In order to ensure the continued survival of the company, the repayment of all unsecured creditors (including dozens of subcontractors and suppliers) and to ensure that he would keep his builder’s license, the director agreed to place the company into Voluntary Administration with Mackay Goodwin.

While this left clients without homes still under construction, and placed some employees in a position of unemployment, this action was deemed necessary in order to protect the existing debt and make sure operations could resume.

A Voluntary Administration moratorium is a brief period of time, usually between one and two months, where an appointed bipartisan administrator attempts to secure debt in the best interests of all parties involved, both debtor and creditor.

The company was allowed to remain trading during the time, and at the end of it we determined that a Deed of Company Arrangement (DOCA) should be entered into between the company and its creditors. Under this agreement, unsecured creditors would receive between 40 and 50 cents to the dollar over the period of several months, a figure far exceeding that which they would have received if the company would have gone bankrupt or wound up.

A moratorium is a multi-stage process. Firstly, the administrator seeks strategies that would attempt to improve the overall stability of the company; this can include minor changes or entire restructuring of assets.

After this has been completed, creditors are met and their demands cycled through in such a way to maximise benefit for all affected parties. Once an accord has been reached, control of the company is handed back over to the Director.

Mackay Goodwin achieved considerable success, securing 40-50c to the dollar for unsecured creditors, full return for those secured creditors affected, and left the company in a position to re-hire priority employees while keeping their builder’s license.

Today the building development company is continuing to trade successfully thanks to its Voluntary Administration intervention. The director stated that he and the company were very appreciative of the administration team and what they helped the company to achieve through the process.

Voluntary Administration - Medical Recruitment Firm Case Study

Debtor finance and a tax debt payment plan helped this medical recruitment firm achieve a much stronger business model

This NSW-based firm performs medical recruitment and temporary locum for a range of medical personnel across Australia, including doctors, nurses, allied health, and dental. A large amount of their work additionally stems from recruiting and deploying medical professionals to remote and rural Australia, as well as FIFO medical staff for the energy and mining sectors.

Despite this, a chain of late-paying debtors (in the range of 2-3 months) and subsequent debts with the Australian Tax Office had left them in a position that was severely impacting their ability to trade due to a limited cash flow.

One of the company directors then contacted Mackay Goodwin and, after a brief consultation period, it was decided that Voluntary Administration would be the correct choice of action for the company.

A VA moratorium involves the temporary appointment of an Administrator to the head of the company, where they are responsible for determining the best course of action for two things: first, the longevity of the company and the potential for them to resume trading as soon as possible, and secondly to sort as good of a deal as possible for both the debt-owing company and their creditors alike.

The process takes usually around 1-2 months, and in that time Mackay Goodwin generated a Deed of Company Arrangement (DOCA) with the ATO on behalf of the company. This is a legally-binding agreement written with the same aims as the Administration process, and with which the ATO has historically been open to -- that is, if they believe it would be better for the Commonwealth through a combination of repayments and continued lifespan for the company rather than bankruptcy and liquidation.

In this case, the ATO looked to a few other factors. The company’s strong performance and history of compliance factored in, as well as their ability to make arrangements regarding their continual financial stability and ability to repay their creditors.

As a result of this acceptance, Mackay Goodwin were able to repay the ATO a significantly reduced, interest-free debt over three years while allowing the medical recruitment firm to remain trading, albeit with a Debtor/Invoice Finance company that would allow them to alleviate their cash flow issues and bring them into a position of stability.

The firm remains in operation to this day stronger than ever, and continues to use that same Debtor Finance facility. A director of the firm gave his opinion that the voluntary administration process implemented by Mackay Goodwin allowed the company to continue trading, and allow them to keep their company.

Voluntary Administration - Security Company Case Study

An 85% reduction in debt gets company through a major trading and cash flow problem

An electronic security company in Brisbane with clients ranging from small boutiques to international mega-corporations within Australia was experiencing difficulty with their cash flow, so Mackay Goodwin stepped in to help.

At a base level, the security company provides physical hardware (such as cameras and CCTV), security expertise/monitoring and consultancy to clients, and customised solutions for those who require it.

The high-calibre profiles of the companies represented would have increased the security challenges for any company. For this particular security company, the sheer magnitude of size for the companies of those contracts ultimately led them into incurring significant working capital difficulties, largely formed by insufficiently detailed terms and deliverables combined with timeline blowout, which ultimately formed an unsustainable pattern of loss.

After a time, the company declared insolvency. Continued difficulties had led them to be unable to sufficiently contribute their taxes, and they owed over $2 million to unsecured creditors (as well as almost $400,000 in employee entitlements, including annual leave payments and outstanding employee superannuation contributions). This, in turn, led to suppliers refusing to provide credit, which forced them deeper into financial difficulties.

Under Section 588G of the Corporations Act 2001, directors can be held personally liable if they knowingly allow a company to continue trading whilst insolvent. The only remaining course for the directors was to appoint a Voluntary Administrator to oversee the process and attempt to provide any chance of saving the company, as well as securing debts.

Mackay Goodwin was contacted, and immediately begun the moratorium process for Voluntary Administration. We focused upon beginning smaller, more secure, more detailed, and ultimately more profitable contracts in order to build up sufficient resources to handle both large and small companies.

Voluntary Administration can in the business world sometimes carry stigma about it, but oftentimes a company needs restructuring in order to stabilise before it readjusts position in order to build towards financial stability. This process takes between 1-2 months in most cases, during which trading continues normally.

As part of the Voluntary Administration process, a Deed of Company Arrangement (DOCA) was entered into for the security company. A DOCA is an agreement between a company and the creditors that it owes money to, outlining the division of debts, and any potential assets that may be used to repay them. The reason a bipartisan Administrator is appointed for this is that the agreement is best served - both for each company and the reputation of the insolvent group - as a way to find an adequate solution for all parties, rather than just the creditor or debtor.

In this case, the DOCA maintained full compensation for employee entitlements and superannuation, 6-22 cents per dollar to creditors, and was able to reduce 85% of overall debt. This allowed Kudos to maintain trading, and they’re now in a position of further expansion.

The security company director said that their experience with Mackay Goodwin and the Voluntary Administration process was the best option for the business, as it allowed them to continue to grow. They’re very glad they decided to go with this option.

Voluntary Administration - Earthmoving Company Case Study

75% reduction in tax debt gets this earthmoving company moving again

By the time a Melbourne-based earthmoving company contacted Mackay Goodwin over reducing their accrued debt, they had build up a $280,000 backlog with the Australian Taxation Office (ATO). The company, which specialises in earthmoving and concrete for swimming pools, were discussing possible options and drawing a blank.

After a consultation process, the company agreed with our assertion that the best way to reduce their overall debt was to put themselves into Voluntary Administration. Through us, they appointed an administrator to oversee the division of debts and their repayment in a bipartisan manner, in order to reach an accord that would allow the company to continue functioning.

Voluntary Administration consists largely of a 4-5 week moratorium. The company can trade as usual, but the administrator conducts additional reviews and examines the best potential way to pay off as much of their debt as possible, ranging from incremental changes to be applied over time to large-scale restructuring.

The main issue we determined to be present was that of cash flow, and so when detailing a Deed of Company Arrangement with the ATO, we reached an agreement to pay 25 cents in the dollar over 12 months to allow the company to both resume trading efficiently and allow payback of debts on a fixed timeline.

A Deed of Company Arrangement (DOCA) is a legally binding agreement between a company and creditors, created by the bipartisan administrator with the aim of pleasing all parties involved, as well as keeping the insolvent company operating. If this isn’t possible, they at least attempt to keep creditors more secure than if their debtor was wound up. The ATO is historically lenient enough with tax debts to allow exceptions for the purposes of debt reduction over time, but has also been increasingly active in legal proceedings, so a formal accord in the form of a DOCA was a potential best-case scenario for the company.

The ATO will generally accept these only if it would favour them better than a simple declaration of bankruptcy or liquidation. This usually occurs if the ATO also considers the company historically compliant and the proposal sound, and this criteria was applicable to the company. For this reason, a DOCA was granted by the ATO.

On top of the DOCA, Mackay Goodwin worked with the directors to stabilise their business structure, helping with restoring their working capital, and restructuring their business management and cost structures.

This involved:

• Improving business management - identifying areas where efficiencies could be achieved including ways to reduce costs, grow revenue and improve accounting practices.
• Improving the management of working capital – identifying ways to better manage inventories and accounts payable, and improving accounts receivable processes (i.e. creating an [A/R] ageing report to track and measure the payment status of all customers, offering payment plans and early payment discounts etc).
• Analysing the company’s cost structure - classifying expenses as either fixed or variable in order to better understand the profitability of the business.

The earthmoving company is now trading from strength to strength and the director of the company had nothing but praise for Mackay Goodwin and the Voluntary Administration process. They gave a big thank you to the Mackay Goodwin administration team that assisted with them getting their business back on its feet.

Voluntary Administration - Medical Recruitment Firm Case Study

Debtor finance and a tax debt payment plan helped this medical recruitment firm achieve a much stronger business model

This NSW-based firm performs medical recruitment and temporary locum for a range of medical personnel across Australia, including doctors, nurses, allied health, and dental. A large amount of their work additionally stems from recruiting and deploying medical professionals to remote and rural Australia, as well as FIFO medical staff for the energy and mining sectors.

Despite this, a chain of late-paying debtors (in the range of 2-3 months) and subsequent debts with the Australian Tax Office had left them in a position that was severely impacting their ability to trade due to a limited cash flow.

One of the company directors then contacted Mackay Goodwin and, after a brief consultation period, it was decided that Voluntary Administration would be the correct choice of action for the company.

A VA moratorium involves the temporary appointment of an Administrator to the head of the company, where they are responsible for determining the best course of action for two things: first, the longevity of the company and the potential for them to resume trading as soon as possible, and secondly to sort as good of a deal as possible for both the debt-owing company and their creditors alike.

The process takes usually around 1-2 months, and in that time Mackay Goodwin generated a Deed of Company Arrangement (DOCA) with the ATO on behalf of the company. This is a legally-binding agreement written with the same aims as the Administration process, and with which the ATO has historically been open to -- that is, if they believe it would be better for the Commonwealth through a combination of repayments and continued lifespan for the company rather than bankruptcy and liquidation.

In this case, the ATO looked to a few other factors. The company’s strong performance and history of compliance factored in, as well as their ability to make arrangements regarding their continual financial stability and ability to repay their creditors.

As a result of this acceptance, Mackay Goodwin were able to repay the ATO a significantly reduced, interest-free debt over three years while allowing the medical recruitment firm to remain trading, albeit with a Debtor/Invoice Finance company that would allow them to alleviate their cash flow issues and bring them into a position of stability.

The firm remains in operation to this day stronger than ever, and continues to use that same Debtor Finance facility. A director of the firm gave his opinion that the voluntary administration process implemented by Mackay Goodwin allowed the company to continue trading, and allow them to keep their company.

Voluntary Administration - Security Company Case Study

An 85% reduction in debt gets company through a major trading and cash flow problem

An electronic security company in Brisbane with clients ranging from small boutiques to international mega-corporations within Australia was experiencing difficulty with their cash flow, so Mackay Goodwin stepped in to help.

At a base level, the security company provides physical hardware (such as cameras and CCTV), security expertise/monitoring and consultancy to clients, and customised solutions for those who require it.

The high-calibre profiles of the companies represented would have increased the security challenges for any company. For this particular security company, the sheer magnitude of size for the companies of those contracts ultimately led them into incurring significant working capital difficulties, largely formed by insufficiently detailed terms and deliverables combined with timeline blowout, which ultimately formed an unsustainable pattern of loss.

After a time, the company declared insolvency. Continued difficulties had led them to be unable to sufficiently contribute their taxes, and they owed over $2 million to unsecured creditors (as well as almost $400,000 in employee entitlements, including annual leave payments and outstanding employee superannuation contributions). This, in turn, led to suppliers refusing to provide credit, which forced them deeper into financial difficulties.

Under Section 588G of the Corporations Act 2001, directors can be held personally liable if they knowingly allow a company to continue trading whilst insolvent. The only remaining course for the directors was to appoint a Voluntary Administrator to oversee the process and attempt to provide any chance of saving the company, as well as securing debts.

Mackay Goodwin was contacted, and immediately begun the moratorium process for Voluntary Administration. We focused upon beginning smaller, more secure, more detailed, and ultimately more profitable contracts in order to build up sufficient resources to handle both large and small companies.

Voluntary Administration can in the business world sometimes carry stigma about it, but oftentimes a company needs restructuring in order to stabilise before it readjusts position in order to build towards financial stability. This process takes between 1-2 months in most cases, during which trading continues normally.

As part of the Voluntary Administration process, a Deed of Company Arrangement (DOCA) was entered into for the security company. A DOCA is an agreement between a company and the creditors that it owes money to, outlining the division of debts, and any potential assets that may be used to repay them. The reason a bipartisan Administrator is appointed for this is that the agreement is best served - both for each company and the reputation of the insolvent group - as a way to find an adequate solution for all parties, rather than just the creditor or debtor.

In this case, the DOCA maintained full compensation for employee entitlements and superannuation, 6-22 cents per dollar to creditors, and was able to reduce 85% of overall debt. This allowed Kudos to maintain trading, and they’re now in a position of further expansion.

The security company director said that their experience with Mackay Goodwin and the Voluntary Administration process was the best option for the business, as it allowed them to continue to grow. They’re very glad they decided to go with this option.

Voluntary Administration - Earthmoving Company Case Study

75% reduction in tax debt gets this earthmoving company moving again

By the time a Melbourne-based earthmoving company contacted Mackay Goodwin over reducing their accrued debt, they had build up a $280,000 backlog with the Australian Taxation Office (ATO). The company, which specialises in earthmoving and concrete for swimming pools, were discussing possible options and drawing a blank.

After a consultation process, the company agreed with our assertion that the best way to reduce their overall debt was to put themselves into Voluntary Administration. Through us, they appointed an administrator to oversee the division of debts and their repayment in a bipartisan manner, in order to reach an accord that would allow the company to continue functioning.

Voluntary Administration consists largely of a 4-5 week moratorium. The company can trade as usual, but the administrator conducts additional reviews and examines the best potential way to pay off as much of their debt as possible, ranging from incremental changes to be applied over time to large-scale restructuring.

The main issue we determined to be present was that of cash flow, and so when detailing a Deed of Company Arrangement with the ATO, we reached an agreement to pay 25 cents in the dollar over 12 months to allow the company to both resume trading efficiently and allow payback of debts on a fixed timeline.

A Deed of Company Arrangement (DOCA) is a legally binding agreement between a company and creditors, created by the bipartisan administrator with the aim of pleasing all parties involved, as well as keeping the insolvent company operating. If this isn’t possible, they at least attempt to keep creditors more secure than if their debtor was wound up. The ATO is historically lenient enough with tax debts to allow exceptions for the purposes of debt reduction over time, but has also been increasingly active in legal proceedings, so a formal accord in the form of a DOCA was a potential best-case scenario for the company.

The ATO will generally accept these only if it would favour them better than a simple declaration of bankruptcy or liquidation. This usually occurs if the ATO also considers the company historically compliant and the proposal sound, and this criteria was applicable to the company. For this reason, a DOCA was granted by the ATO.

On top of the DOCA, Mackay Goodwin worked with the directors to stabilise their business structure, helping with restoring their working capital, and restructuring their business management and cost structures.

This involved:

• Improving business management - identifying areas where efficiencies could be achieved including ways to reduce costs, grow revenue and improve accounting practices.
• Improving the management of working capital – identifying ways to better manage inventories and accounts payable, and improving accounts receivable processes (i.e. creating an [A/R] ageing report to track and measure the payment status of all customers, offering payment plans and early payment discounts etc).
• Analysing the company’s cost structure - classifying expenses as either fixed or variable in order to better understand the profitability of the business.

The earthmoving company is now trading from strength to strength and the director of the company had nothing but praise for Mackay Goodwin and the Voluntary Administration process. They gave a big thank you to the Mackay Goodwin administration team that assisted with them getting their business back on its feet.

Voluntary Administration - Building Developer Case Study

This South Australian builder continues to trade, thanks to a DOCA, restructure and dispute resolution

When an Adelaide building development company found itself in a lengthy and protracted legal dispute over a costly project, it found itself unable to trade out of the heavy losses it had incurred as a result of the deal.

The company had multiple ventures and millions of dollars tied within a grouping of properties, which they now discovered they had no direct ownership over due to undocumented agreements with external parties.

Despite the Supreme Court ruling in the favor of the company, the news was too little and too late. They had accrued $6 million total in debt, with no concrete way of paying them back. In order to ensure the continued survival of the company, the repayment of all unsecured creditors (including dozens of subcontractors and suppliers) and to ensure that he would keep his builder’s license, the director agreed to place the company into Voluntary Administration with Mackay Goodwin.

While this left clients without homes still under construction, and placed some employees in a position of unemployment, this action was deemed necessary in order to protect the existing debt and make sure operations could resume.

A Voluntary Administration moratorium is a brief period of time, usually between one and two months, where an appointed bipartisan administrator attempts to secure debt in the best interests of all parties involved, both debtor and creditor.

The company was allowed to remain trading during the time, and at the end of it we determined that a Deed of Company Arrangement (DOCA) should be entered into between the company and its creditors. Under this agreement, unsecured creditors would receive between 40 and 50 cents to the dollar over the period of several months, a figure far exceeding that which they would have received if the company would have gone bankrupt or wound up.

A moratorium is a multi-stage process. Firstly, the administrator seeks strategies that would attempt to improve the overall stability of the company; this can include minor changes or entire restructuring of assets.

After this has been completed, creditors are met and their demands cycled through in such a way to maximise benefit for all affected parties. Once an accord has been reached, control of the company is handed back over to the Director.

Mackay Goodwin achieved considerable success, securing 40-50c to the dollar for unsecured creditors, full return for those secured creditors affected, and left the company in a position to re-hire priority employees while keeping their builder’s license.

Today the building development company is continuing to trade successfully thanks to its Voluntary Administration intervention. The director stated that he and the company were very appreciative of the administration team and what they helped the company to achieve through the process.