Summary
Project Dover relates to the Restructuring of a medium size professional services enterprise specialising in information technology strategies. Following a Pre-Restructuring Assessment, a strategy to reset the business was formulated and fast tracked through the small business restructuring process outlined in Part 5.3B of the Corporations Act.
Background
An established business with over 20 years of trading history and an office in the UK, the business was severely impacted during Covid. Staff numbers significantly declined during Covid as the business struggled to maintain and service declining contracts.
Following Covid, the Directors decided to focus on margins in the face of stagnating sales and increased staff to replace those lost during Covid. Unfortunately, this resulted in two cases of serious financial mismanagement (possibly fraud) in the new cohort of employees. One of these matters was reported to the police and remains under investigation. The inadequacy of the finance function and non-lodgement of tax returns also triggered Director Penalty Notices for the Directors.
Restructuring
On the back of the failed initial turnaround in 2023, the Company refocused and tried again to reset the business, this time utilising Restructuring, but in the first instance engaging GM Advisory to undertake a Pre-Restructuring Assessment.
Our advice was that the Company would be better off undertaking a Restructure compared to Liquidation as this would be a better outcome for creditors and other stakeholders. In liquidation, the employees would be terminated, and they would likely need to access the Fair Entitlements Guarantee Scheme (“FEG”) to obtain their employee entitlements (Annual Leave & Payment in Lieu of Notice). Due to the nature of liquidation, there would have been no return to creditors.
The Restructuring Plan offered to pay 20 cents in the dollar over 12 months and was accepted by the Company’s creditors, (the largest of whom was the ATO). The Plan was accepted and is currently in place with early payout anticipated before the end of the calendar year.
Directors’ Feedback
We really appreciate the guidance provided by GM Advisory and team. We were let down by so many professional advisors who were well credentialled but just constantly dropped the ball. With assistance from GMA we undertook a Restructuring and have addressed most of the outstanding issues although the DPN’s are still being worked through. Going directly to a registered liquidator would not have worked for us as the process is more complicated than it seems and we were grateful for Ginette’s preparation and advice during and after the Restructuring appointment.
