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Project B – Small Business Restructuring Case Study

Background

The Company provided real estate and rental property management services on the Gold Coast and despite making a small profit in the most recent year, it had been impacted by a number of factors which caused it to run up an accumulated tax debt.

This legacy debt was impacting its capacity to grow and take on more staff which at the time of our engagement was 7 FTEs.  The Covid pandemic and lockdowns added unrecoverable costs to the property sales and marketing process, for example, property inspections impacted by social distancing and hygiene requirements were previously not required.  These costs were difficult to pass on. 

What Was Going to Be Different

The company undertook to restructure its affairs and turnaround its business as a going concern so that it could continue to do business with trade suppliers and service its local community; and continue as an employing and a tax paying entity.

The Plan

In liquidation, the employees would be fired and employees would likely need to access the Fair Entitlements Guarantee Scheme (“FEG”) to obtain their employee entitlements (Annual Leave & Payment in Lieu of Notice).  There would not be any return to creditors due to the nature of liquidation.

The company offered to pay 20.2 cents in the dollar over 12 months and the creditors, consisting mainly of the ATO accepted the proposal.  Within 3 months, the director had taken out a personal loan and paid the compromised debt under the Plan in full.  The Company was returned to normal status and continued to trade.

Director’s Comments

The director advised that there were some hiccups during the restructuring because ‘everyone had to be informed about it’.  Once Ginette and the team explained the true state of affairs those that enquired realised that it was business as usual and let me get on with doing what I do best.  I was relieved once the Plan was approved and I could make the payment and return to normal.