INSOLVENCY
MANAGEMENT
CASE STUDY 1


Voluntary Administration to Deed of Company Arrangement; ATO Notice

If your company has a tax debt or fallen behind on payment of your PAYG, GST and superannuation - we'll work together for a solution.

Here is a real case study

ABC manufactured truck-mounted lifting equipment in Australia. It started importing from overseas (‘the big project’). The expansion was unprofitable and ABC was short of cash flow in the start-up phase for the imported product. ABC fell behind in the payment of PAYG, GST and superannuation - a common scenario.

Repayment arrangements to the ATO were not honoured – there wasn't sufficient cash flow to meet the repayment schedule. The ATO sent a notice to the director’s home – pay up or appoint a voluntary administrator or liquidator within 14 days, or become personally liable for the debt.

The director was in a panic. What to do? Customers were slow paying. Suppliers were pressing for payment. The director regretted the decision to expand. The stress didn't help family life either. The director called his accountant, who referred him to us. (The director can also call us directly). We met the director the same day, and also, spoke with his accountant, and we worked out a plan the same day.

Levi Consulting explained in plain English the options – how the tax notice operates; liquidation or voluntary administration followed by a deed of company arrangement. Levi considered an informal work-out and explained why it wouldn't work.

Conclusion – in this case

ABC entered into voluntary administration, and then, entered into a deed of company arrangement (rather than liquidation). ABC survived. Creditors were prepared to accept about 20 cents in the dollar on their claims and forgive the remainder of their claims.

The quick appointment of David Levi as
voluntary administrator prevented the director becoming personally liable for the debt to the ATO, and David took control – it was a relief for the director. And, ABC was able to return to its core business.
Footnote

A deed of company arrangement is often suitable when the underlying business is viable, or where directors want to avoid liquidation. It needs support of more than 50% of creditors in number and value.

Why would suppliers agree to a deed? Suppliers often want to continue supplying a company, if they are confident it can be rehabilitated. Or a supplier believes that it will get a bigger payback in a deed than liquidation, in a shorter time.

Liquidation, or creditors’ voluntary liquidation, is appropriate when there are no prospects of achieving a deed of company arrangement or creditors vote against a deed, and there are no prospects of an informal work-out of the company’s financial problems.

Levi Consulting offers a same-day or next day service to assess the prospects of a work-out. This is what we do best. We are well regarded and trusted.
On a no-obligation basis

Take a moment to call David Levi at 02 9016 4113 or email dlevi@leviconsulting.com.au. And let us help you get your company to where it needs to be.
This case study is not a substitute for formal advice concerning your circumstances. Liability limited by a Scheme approved under the Professional Standards Legislation.

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