A corporate restructure is a way to give a business a 2nd chance at life without all the insurmountable debt.
There is a correct way and a wrong way to restructure a Company’s business. Let me say from the outset that we will not help someone restructure a Company’s business in the wrong way as this ends up as being a phoenix transaction or a transaction to defeat creditors and is able to be undone by a Liquidator or by the Australian Securities Investment Commission. Further we will only help with a restructure once, in a business’ lifecycle. If a further restructure is needed, there is a systemic problem with the business that needs to be addressed. We do attempt to address the problems with you so that hopefully, your business does not get into this position again in the future.
The right way to restructure a Company is to have a licensed independent 3rd party valuer value all of the business’ assets (including physical assets, intellectual property and goodwill). That determines the market sale price for the assets. From there a sale of business is needed to document the sale to a new Pty Ltd Company with a new Director and REAL money needs to be paid by the New Company to the old Company for the sale. I know people are about to say “but I loaned my Company money, can’t I just take the business.” The answer is no. We will also recommend services to assist the Director to ensure that the Company is properly supported and is not destined for the same untenable position in the future.
The wrong way of Corporate Restructuring, version 1 – having the valuations done but not paying any consideration for the Company’s assets and transferring them to a new Pty Ltd Company. This is a massive no, no. Do not do this, the transaction will be undone.
The wrong way of Corporate Restructuring, version 2 – thinking you know what your assets are really worth and estimating the value of them. This will not be accurate, and the valuation will be incorrect. If your estimate is less than the valuation, the transaction is at risk of being undone. If your estimate is greater than the valuation, then you have overpaid for the business.
Sometimes the market value of the Company is less than the value of creditors, the Company may be placed into Liquidation at the end of the restructure process. Refer to our Liquidation page about how we help you with this part of the process.
Other times, the structure of the business does not allow for a formal insolvency process at the end, but the above process is the same as it fair and protects all parties involved.
The major advantages of a Corporate restructure are that it costs less than a Voluntary Administration process for the same results and you maintain control of the business throughout the entire process. Depending upon your specific circumstances will determine the speed of the process and if it is right for you.
We are able to help you with the correct restructuring process. Take a tip, if you do it the right way from the outset it will save you money in the long run. Please note that we do a restructure with a select number of clients and there are quantifiers to be eligible to do a restructure. Book an Appointment to see if a Restructure is right for you.
Voluntary Administration is a process that will force all creditors into a meeting to discuss the Company’s future. The point of a Voluntary Administration is to see if the Company can continue in business without the insurmountable debt position by offering creditors a payment of a percentage of their debt through a formal, structured manner. It is a long and costly process and unless there is a very good reason to utilise it such as licences depend on the Company staying afloat. Accordingly, we rarely recommend clients use the Voluntary Administration process as there are more cons than pros.
It should only be used if you genuinely have money to put into a Deed of Company Arrangement or if you are able to generate the money through trading i.e. you have signed documents for a new contract and are about to commence work, NOT a hope that the next big customer will come off in the future.
There are many cons to the Voluntary Administration process, the biggest one is that you will lose control of your Company for the Voluntary Administration process. There are two (2) ways around losing control being provide the Voluntary Administrator with a personal indemnity to continue trading or providing the Voluntary Administrator with a licence agreement to continue trading. These are both very expensive methods to continue trading a business with no security provided to yourself.
If you are able to continue trading during the Voluntary Administration process, there is no guarantee that creditors are going to approve your Deed of Company Arrangement proposal unless you have great relations with your creditors that are not related to you. Please note that creditors related to you and any debt(s) owed to you personally are able to be set aside by the Voluntary Administrator and not counted when voting on the Deed of Company Arrangement proposal.
There is one pro to the Voluntary Administration process which is that it will force your creditors to deal with the debt. However, if your relationships with creditors are strained, they may be inclined to vote your Company into Liquidation even though it may be more commercial to accept the offer.