Byronvale Advisors FAQs For Directors and Companies

Why should I deal with Byronvale Advisors if I have been told to appoint an administrator or liquidator?

Administrators and liquidators have a fixed view towards insolvency, aiming only to take control of the company and wind them up, which sometimes is more costly.

Byronvale Advisors breaks that mindset. We look at all alternatives for the benefit of our stakeholders. From our extensive experience, we recognise most businesses can often be saved long before resorting to insolvency. Directors have nothing to lose and everything to gain by obtaining a second opinion about pre-insolvency and Safe Harbour provisions, which encourage directors to pursue restructuring opportunities that will deliver a better outcome.

Who we help?

We work in a broad range of industries and sectors, including:

  •  Construction
  •  Hospitality services
  •  Retail
  •  They know there is a problem but don’t want to face up to it
  •  Transport and warehousing
  •  Manufacturing
  •  Not-for-profits

Utilising our extensive network of specialists and experts, we will assemble a team tailored to your business – industry, size and structure.

What are your fees and charges?

Our initial consultation is free of charge and obligation, and we may offer you options that others cannot.
Once we understand your unique situation and the strategy needed to repair it, we will provide you with a quote for our services. We will always make you fully aware of all costs prior to engaging our services, and you can always walk away if you choose to without charge or obligation.

Restructuring & Business Turnaround FAQs

How do you know if a company is in financial trouble?

There are several warning signs and different ones for different stakeholders. Examples are directors and management running from problem to problem and not working on the things they should be, cash is tight and there is difficulty getting paid or paying creditors, feeling overwhelmed, staff dissatisfaction, and a lack of direction and a plan to achieve that vision.

What does a turnaround specialist do?

A turnaround specialist works with a distressed company to improve operations and make it profitable again. They aim to help a company position itself more securely in the market for the long term after the initial recovery. They can also show companies how to prevent future similar problems by identifying the issues that led to a failure or near disaster and providing information about how to address them if they emerge in the future.

At Byronvale Advisors, this process involves our philosophy of coaching management and company directors to work on their business, not in their business.

When is a turnaround right for my business?

This is a complex question where the answer relies on the state the business is in, the attitude and drive of the management and the size of the business. We ask the management many questions and then make an objective assessment ourselves. Two key questions we ask are:

  •  can and do you want the business to survive and are you prepared and committed to doing whatever it takes to make that happen?
  •  Could the business be viable, or are only parts of the business viable?

How long does it take to turnaround and restructure an organisation?

There are a lot of variables that will affect the timeframe e.g. commitment of the Board and senior management, the size or the business, the state of the business at the start of the process. We have completed a turnaround in as little as six months, and larger more complex engagements may take two to three years.

For a turnaround or restructuring engagement to be successful, however, it is vital for management to have the right attitude and commitment not only towards achieving survival, but eventually running the business better.

What sort of actions are available to companies in financial distress?

There are five primary avenues – Safe Harbour with a restructuring advisor, administration methods (voluntary administration, receivership, deed of company arrangement, and liquidation), there are turnarounds either by management or with the help of a turnaround advisor, cease trading or do nothing. Obviously only some of these actions are proactive ways to get a ‘better outcome’.

Pre-Insolvency FAQs

What are the consequences of insolvency?

There are various penalties and consequences of insolvent trading for directors, including civil penalties, compensation proceedings and criminal charges. There are also implications for other stakeholders – employees may lose their jobs, creditors may not only lose money but could face ongoing financial distress, customers and clients that rely on the products and services are affected, investors and lenders are financially impacted, and the wider community in which your business is part of is impacted. These effects may not just be a one off and may continue for several years.

What does insolvency mean in business?

A company is insolvent when it cannot pay its debts as and when they become due and payable. The Corporations Act defines solvency and insolvency as:

Section 95A — Solvency and Insolvency

  •  A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.
  •  A person who is not solvent is insolvent. A person is defined to include a corporation.

What are the signs of insolvency?

Some signs are:

  •  Poor cash flow.
  •  Ongoing pressure from creditors, including the ATO.
  •  Ceiling borrowing. Your overdraft and credit account limits reached or exceeded. And personal assets used to guarantee loans on top of director guarantees.
  •  Reduced supplier terms.
  •  Periods of quick and large growth.
  •  Debtor days exceeding far past industry average.
  •  No clear business model
  •  High staff turnover and the inability to attract the best talent
  •  Directors lending their own money to pay creditors
  •  Over-reliance on one customer
  •  Internal disputes
  •  Absenteeism of owners, director, and senior management

Safe Harbour FAQs

What is Safe Harbour protection?

Safe Harbour protections are provisions within the Corporations Act that enable directors to continue trading while the company is insolvent if they believe their actions will ‘reasonably’ lead to a ‘better outcome’ for the company.

Is Safe Harbour of benefit to small businesses?

The Safe Harbour provisions can be highly useful for small and startup businesses. In Australia, 80% of small businesses that enter formal administration end up in liquidation. For small businesses, Safe Harbour gives directors an avenue to rectify their problems and avoid formal administration. It is also cheaper, and the directors are still in control of their business.

For startup businesses, Safe Harbour can ease some problems for their investors who would previously be reluctant to take on roles as directors because of the risks associated with unintentional breaches of insolvency law.

Can I come out of Safe Harbour?

The best result and the aim of Safe Harbour is that the course of action leads to a better outcome for the company and the company is no longer insolvent trading. However, the Safe Harbour also ceases to apply when:

  •  Directors do not take the course of action by the end of a reasonable period.
  •  Directors stop taking the course of action.
  •  The course of action ceases to reasonably lead to a better outcome for the company.
  •  A liquidator or administrator is appointed to the company.

How do directors implement Safe Harbour?

The directors must develop a restructuring plan, ensure they are current with their employee entitlements and tax obligations, ensure no misconduct by officers or employees, inform themselves of the company’s financial position and engage a restructuring advisor.

10 REASONS TO CALL US:

  • Advice on business restructuring
  • Choose between recovery or insolvency
  • Lack of understanding of financial information
  • Analysis of profit margins and costs
  • Poor debtor collection management practices
  • A better understanding of pre-insolvency and Safe Harbour
  • Business running out of cash but has fast growth
  • Poor inventory or creditor management
  • Build a healthy and more profitable business
  • You’re a worried director dealing with financial distress