March 20, 2023 • 18 mins
Small Business Restructuring is where a chartered accountant, their client and a registered liquidator work together to deal with the debts of the small business before it’s too late. This episode uses a real-world example of the process in action to show how it all works and explains to CA ANZ members the steps to take to get their client started. The key – acting early. Find out what’s holding members and clients back, the role of a registered liquidator (RL) and why using an RL will improve your relationship with your client. Registered liquidator and trustee in bankruptcy Andrew Barnden FCA (Director, Rodgers Reidy) and CA ANZ Senior Policy Advocate for Business Reform Jill Lawrence join Gillian to explain.
CA ANZ Helpsheet: Insolvency reforms to support small business
The chartered accountant's role in insolvency and restructuring
Read more about the Small Business Restructuring Process in Acuity
REP 756 Review of small business restructuring process | ASIC
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Gillian Bowen, Host (00:07):
Hello, my name is Gillian Bowen, the Australian Manager of
Public Affairs at Chartered Accountants, ANZ, or CA ANZ. This is
Small Firm, Big Impact.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (00:21):
If you sit with your accountant and call in the
specialist a registered liquidator, they can help you navigate that
journey if you've got a viable business. That's the key
thing here. Well, let's get the debt sorted and clear
you to move ahead and that's what saves the business,
acting early.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (00:37):
I often find it's a three way partnership between myself
as a restructuring practitioner who is often only involved for
a short period of time. The member who normally becomes
involved in the turnaround strategies and their implementation, together with
the ongoing monitoring, monitoring of their client and the client themselves.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (00:53):
I think our members
tell us that when they start these difficult conversations with
their clients, the clients stop coming. But the upside of
this process, if you meet the eligibility criteria, it's a
positive conversation.
Gillian Bowen, Host (01:08):
It's the podcast giving you and your clients the up
to date information you need to do your jobs. Each
fortnight I share resources, tools and expert advice provided by
CA ANZ and a range of people across our profession. So
make sure you're following the pod in your favourite pod app.
And if you've got an idea for the show email
podcast@charteredaccountantsanz.com Today we have chartered accountant, registered liquidator and trustee
(01:37):
in bankruptcy, Andrew Barndon, a director at international insolvency firm
Rodgers Reidy. He's also the chair of the Insolvency Management
Committee at Chartered Accountants ANZ, and also in the studio,
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform. The topic,
the Small Business Restructuring Process. We're going to dive into
(01:59):
what it is and show you how it can save
your client's business. Andrew and Jill, welcome to Small Firm,
Big Impact.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (02:07):
Thanks. Great to be here today.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (02:09):
Gill, looking forward to it.
Gillian Bowen, Host (02:11):
Okay. I think giving an example of a business who's
used the small business restructuring process is a good place
to start and then we can pick apart the process
of all that. Andrew, over to you.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (02:23):
Thanks. Late last year, I was appointed to a security company.
It was under financial distress largely as a result of
the COVID 19 pandemic. And at the same time, unfortunately,
the director was going through a marriage separation, causing him
some severe mental health issues. The Director via his accountant approached
Rodgers Reidy as he had an outstanding payroll tax liability,
(02:46):
plus a significant ATO liability, even though he had a
payment plan of $10,000 per week in place. This was
strangling the company's cash flow and would continue to do
so for a considerable period of time, despite the fact
that it was a profitable business moving forward. So I
met with the director and his accountant to discuss the
various options available, including the relatively new Small Business Restructuring Process.
(03:11):
After considering the options, the director agreed that the Small
Business Restructuring Process was the best option for him. And
after several discussions with myself and his accountant, he submitted
a restructuring plan to his creditors, which involved refinancing his
real estate and offering $0.25 in the dollar in full
and final satisfaction, which was a better outcome than the
(03:32):
estimated dividend in hypothetical liquidation scenario that I calculated. The
creditors accept this offer. The finance was obtained as it
was conditional upon creditors voting in favour of it. The dividend
was paid to creditors and provided the company with a
clean slate moving forward, I should add from my experience,
the ATO as the major creditor in most scenarios has
(03:53):
been very supportive of the Small Business Restructuring Process.
Gillian Bowen, Host (03:56):
Yes, right. I've got I've got I've got a couple
of questions about that later. But crack on.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (04:00):
No, it's it's and they've been supporting especially if the
companies employing can show that the major causes of its
financial distress was outside the director's control. So we're talking
COVID 19 over the last few years, but also put
in there natural disasters like fire, flood and even health
issues of the director or his immediate family, including in
this example, mental health, which is a big play in
(04:22):
society at the moment. And the ATO also wants to
know that the business is viable moving forward and has
cash flow forecasts to support this, to support it moving forward.
Gillian Bowen, Host (04:34):
Jill, what are your takeaways from
hearing that real world example?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (04:39):
It's the collaboration. I think a lot of our members
are a bit concerned they'll lose a client, but as
we've just heard from Andrew, it's about working together as
a member support your clients to get the right help
at the right time and as soon as possible. So
the accountants saw the red flags, sat with their client,
(04:59):
talking to Andrew, work together to decide the best option,
and then supported the business through it. Yes, Andrew took
over the restructuring to deal with the creditors and manage
the plan. That's his job. But the accountant was there
keeping that business running day to day and looking viable
into the future.
Gillian Bowen, Host (05:17):
Jill, can you also now give me a quick explainer
of what the small business restructuring process is and how
it saved in this instance, what Andrew was talking about,
that client's business.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (05:31):
Oh, gosh, what, in 30 seconds or less?
Gillian Bowen, Host (05:34):
That's right. I do have a timer on as those listening
along will know.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (05:37):
I think the key
things is about getting your business back to business. So
in essence, there are criteria. You have to have total
debts of less than $1 million. You have to have
your tax lodgement pretty much up to date and you
have to have paid or can pay any entitlements of
your employees that are due and payable, such as their superannuation.
(06:00):
Now if you're in that position, but you can see
financial hardship on the horizon or in fact you possibly
pretty much looking at insolvency right now. Get talking about
it because if you sit with your accountant and call
in the specialist, the registered liquidator, they can help you
navigate that journey if you've got a viable business. That's
(06:22):
the key thing here, Gill. You've got to have a
viable future. Well, let's get the debt sorted and clear
you to move ahead, and that's what saves the business,
acting early.
Gillian Bowen, Host (06:33):
So, Andrew, people listening along might be thinking then what
is the difference between a small business restructure and voluntary administration?
Can you explain that difference?
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (06:44):
Yes. As Jill has mentioned, the Small Business Restructuring Process
is only available to small businesses with debts of less
than $1 million and who meet the eligibility criteria. However,
the main difference between the small business restructuring and the
voluntary administration is that the directors remain in control of
the day to day operations of the business whilst going
through the small business restructuring process. Compare this to the
(07:07):
voluntary administration scenario where the administrator takes control of the
trading as he's personally liable for any debts incurred. (He
or she.) He or she. Sorry. Yes, the the reg
the administrator is personally liable for the debts incurred. But
as a result of this, as the directors remain in control,
this result in cheaper costs, professional costs being incurred under
(07:29):
the small business restructuring process compared to the voluntary administration.
And in addition, the directors are more comfortable and responsive
by the fact that they are left in control of
the day to day of business affairs rather than effectively
being put on the sidelines by a voluntary administration process.
So basically it leaves the directors doing what they do best,
(07:49):
their trade or profession and the restructuring practitioner doing what
they do best, saving companies and businesses.
Gillian Bowen, Host (07:54):
Okay.
Okay. So then, Jill, and
you touched on this a little bit already, I think,
but what is it that's holding back our members and
then in turn their clients from using this process that
Andrew and you have been explaining today?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (08:08):
I think the first one is not being aware of it. Okay.
For our members in particular...
Gillian Bowen, Host (08:12):
tick, tick.
Listen to this
Podcast, share it with all and sundry. Continue on. Yes,
what else?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (08:18):
I think our members tell us that when they start
these difficult conversations with their clients, the clients stop coming
because they probably can't pay their accountant's bill. But the
upside of this process, if you meet the eligibility criteria,
it's a positive conversation. What we're talking about is we
can actually, if all the things happen correctly, keep your
(08:39):
business going. But for the directors and I think sort
of Andrew's alluded to it, we have to remember at
this end of the business scale, the business is their life.
It's what pays their rent. It's what puts food on
the table for the family. It's not something separate from
their day to day world. So it is a very
difficult decision. So just to call out to our members
(09:00):
is really keeping conversation with your clients, understand what's impacting
their business. We talk about the pandemic, but let's be honest,
we can have roadworks set by a local council that
go for 18 months instead of six months. You yourself
might have, I think, Andrew's example there was a divorce
and stress in the family. Anything that's outside of your
(09:22):
control that affects your business, seek help early and members
don't hesitate to speak to the experts. Remember, your registered
liquidator probably is already a chartered accountant and then has done extra,
I think it's 4000 hours just in insolvency to even
apply to get what we call their ticket. So trust them,
(09:43):
call them in early and have that conversation.
Gillian Bowen, Host (09:47):
Well, that then.
leads me to what I'm thinking next Andrew for members
who are listening along today and who have a client
who really need to get involved in this process, what
is step one?
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (09:58):
A member should always be proactive with his clients. They're
the trusted advisor and if they see any early warning
signs of financial distress, early intervention maximises the chance of
restructuring and saving the business. The members listening should be
asking themselves that if they have any clients on the
ATO payment plan for, for example, whether or not that
(10:18):
payment plan is actually in the best interest of their clients,
especially if it's a significantly affects their cash flow and
they need to consider what the other options are, including
the Small Business Restructuring Process. If they identify a problem,
they should reach out to a registered liquidator to obtain
professional and qualified advice and to discuss the options available.
(10:39):
My firm, Rodgers Reidy, really like many other insolvency and reconstruction firms,
offer an initial consultation obligation and cost free.
Gillian Bowen, Host (10:47):
Okay, that's interesting. Cost free. I do enjoy that aspect
of it. But Jill, is there anything else you'd like
to add?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (10:53):
I think just a call out to directors. Look, I
know it's difficult. You spend all your day running your business,
but what the one thing you've got to keep your
eye on is your cash flow. And you've got to
be looking forward with that. If you see any bumps
in the next two months, that's when you start talking
to your accountant. Let's get ahead of these bumps and
make sure you stay contributing to the economy.
Gillian Bowen, Host (11:16):
Good points there, Jill. Andrew, how do you go about
finding a registered liquidator.
And why should you use one?
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (11:24):
To act as a small business restructuring practitioner, as you've indicated,
you have to be a registered liquidator and they have
to be registered through ASIC - the Australian Securities Investment Commission. Simple
Internet search on the words registered liquidator will take you
to the relevant web page at the ASIC website, which
has an Excel workbook listing every registered liquidator by state.
(11:46):
So you can do a search by by your locality
to find out who's closest to you if need be.
In addition, and for most for extra comfort, most registered
liquidators are members of a professional body. My case, CA ANZ
and I also members of an insolvency and reconstruction organisations
such as the Australian Reconstruction Insolvency Turnaround, or the Association
(12:08):
of Independent Insolvency Practitioners.
Gillian Bowen, Host (12:10):
Okay, that's good. All right. So there is a place to
find
information and we'll put
all the links to that in the show notes so
don't worry about having to jot it down right now,
we'll make them hyperlinks. Jill, I want to come back
to the ATO. I mean, in Andrew's example.
The ATO is,
getting ends up getting less than what they potentially would
argue they were owed. Why does the ATO accept this
(12:30):
restructuring process?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (12:33):
Because they're commercially savvy and if a viable business keeps operating,
they keep paying tax. And I know not everyone will
believe this, but the ATO does want you to survive,
but you've got to chat to them early that this
is the key. And secondly, why this process in particular?
Because it means the directors have been proactive. That's a
(12:56):
tick for the ATO to start with. It also means
the ATO will get back more of their tax dollars
that were due at the time this process started. So
statistics are already telling us that the average return is
$0.15 in the dollar. Now if you don't do anything,
can you go through another external administration process, possibly end
(13:17):
up in liquidation in any of those the ATO walks
away with? Now, let me check. Oh, that's right, $0.00
in the dollar. So it's a very attractive proposal to
the ATO who actually want a viable business to keep
employing and keep paying tax.
Gillian Bowen, Host (13:33):
Okay. Well, Andrew, the other question I think that
people might be thinking as they're listening along is that
the registered liquidator will then take clients away from the accountant.
Explain why that's not the case.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (13:44):
This is definitely not the case. And in fact, especially
under the small business restructuring process, we often see the
member's client become a better, more efficient client without the
headache of significant taxation liabilities and other debts and the
associated issues that come with dealing with those creditors, including
the ATO. Not to mention the goodwill of a successful
(14:04):
restructure can create between the member and their client as
a result of dealing with financial problems faced by the client.
I often find it's a three way partnership between myself
as a restructuring practitioner who is often only involved for
a short period of time. The member who normally becomes
involved in the turnaround strategies and their implementation, together with
(14:25):
the ongoing monitoring, monitoring of their clients and the client themselves.
In addition, most insolvency and reconstruction firms are specialists that
don't have a taxation business service or audit division. So
members don't need to be worried about the client being
pinched from them. And as mentioned earlier, the restructuring process
often results in a better overall client for their members
(14:46):
moving forward.
Gillian Bowen, Host (14:46):
Okay. That sounds that sounds like it's a it's a
win win in a tricky situation.
Jill, how do you see the roles of the chartered
accountant and the registered liquidator working together?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (14:56):
I think our members can I say the canary in
the coal mine? It's an old saying, but that's their job.
You know, see those red flags, open up the conversation
as soon as you can. And if you need to
call in, support the specialist, do direct your client to
the right people. So our members have a key role
(15:17):
in making sure directors facing financial stress don't buy into
the Google
your company. That just leads to horrendous trauma later down
the line. So members, make sure you know who your
clients need and connect them early. Now for the registered liquidator,
(15:40):
as you've heard from Andrew and myself, they're highly qualified,
they're highly regulated, they have a breadth of experience and
they can manage creditors. So get them on your team early.
Gillian Bowen, Host (15:50):
We are rapidly running out of time. Andrew I just
wanted to quickly.
Touch on what are the costs here.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (15:55):
The cost of conducting a small business restructuring, it varies,
depends on the fact matters and circumstances. However, generally it's
approximately about 5 to 10% of the total debts, which
means between 25 to $0.35 in the dollar. A small
business can deal with its debts in full and final
satisfaction of all those claims, including costs.
Gillian Bowen, Host (16:14):
Okay. All right. So and Jill, why is this topical
at the moment?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (16:19):
Primarily because there's a call from the industry to government
to start bringing together both the corporate insolvency, which is
what we're talking about today and the personal insolvency systems. Why?
Because the assets of those directors at the small business
end are their personal assets, so there's got to be
some harmonization between the two.
Gillian Bowen, Host (16:40):
All right. Look, we are out of time. Is there.
Anything else that
you want people to know about Jill, just before we
wrap up?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (16:46):
Act early.
Gillian Bowen, Host (16:47):
Act early. I love it. The other thing I will
let you know is that everything
that the team has talked about today, we will put
in the show notes. There is a lot to learn
in this episode and I don't want you to miss
a thing. So the links will be in there and
they'll be hyperlinked and take you to what you need
on our website and elsewhere and share this episode with
your clients who want to understand more about the process
(17:08):
and what it'll mean for them. Also, have you listened to
the other episodes from Season Three? Episode Three has been
very popular. It's on accountants financing letters. There's also a
useful episode on cyber security for SMPs and one on
the ATO changes to work from home deductions, plus an
explainer on a great development for CA ANZ the ability to
(17:29):
use FEE-HELP to help cover the course fees for becoming
a chartered accountant. Follow the pod to find them or
click the links on the show notes that I will
put there for you. The podcast has an email as well,
so feel free to get in touch. podcast@charteredaccountantsanz.com Let's start
a conversation. Thank you Jill and Andrew for being my
experts on Small Firm, Big Impact.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (17:50):
Thanks Gill.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (17:51):
Thanks and have a great day.
Gillian Bowen, Host (17:53):
Bye bye.
Hello, my name is Gillian Bowen, the Australian Manager of
Public Affairs at Chartered Accountants, ANZ, or CA ANZ. This is
Small Firm, Big Impact.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (00:21):
If you sit with your accountant and call in the
specialist a registered liquidator, they can help you navigate that
journey if you've got a viable business. That's the key
thing here. Well, let's get the debt sorted and clear
you to move ahead and that's what saves the business,
acting early.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (00:37):
I often find it's a three way partnership between myself
as a restructuring practitioner who is often only involved for
a short period of time. The member who normally becomes
involved in the turnaround strategies and their implementation, together with
the ongoing monitoring, monitoring of their client and the client themselves.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (00:53):
I think our members
tell us that when they start these difficult conversations with
their clients, the clients stop coming. But the upside of
this process, if you meet the eligibility criteria, it's a
positive conversation.
Gillian Bowen, Host (01:08):
It's the podcast giving you and your clients the up
to date information you need to do your jobs. Each
fortnight I share resources, tools and expert advice provided by
CA ANZ and a range of people across our profession. So
make sure you're following the pod in your favourite pod app.
And if you've got an idea for the show email
podcast@charteredaccountantsanz.com Today we have chartered accountant, registered liquidator and trustee
(01:37):
in bankruptcy, Andrew Barndon, a director at international insolvency firm
Rodgers Reidy. He's also the chair of the Insolvency Management
Committee at Chartered Accountants ANZ, and also in the studio,
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform. The topic,
the Small Business Restructuring Process. We're going to dive into
(01:59):
what it is and show you how it can save
your client's business. Andrew and Jill, welcome to Small Firm,
Big Impact.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (02:07):
Thanks. Great to be here today.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (02:09):
Gill, looking forward to it.
Gillian Bowen, Host (02:11):
Okay. I think giving an example of a business who's
used the small business restructuring process is a good place
to start and then we can pick apart the process
of all that. Andrew, over to you.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (02:23):
Thanks. Late last year, I was appointed to a security company.
It was under financial distress largely as a result of
the COVID 19 pandemic. And at the same time, unfortunately,
the director was going through a marriage separation, causing him
some severe mental health issues. The Director via his accountant approached
Rodgers Reidy as he had an outstanding payroll tax liability,
(02:46):
plus a significant ATO liability, even though he had a
payment plan of $10,000 per week in place. This was
strangling the company's cash flow and would continue to do
so for a considerable period of time, despite the fact
that it was a profitable business moving forward. So I
met with the director and his accountant to discuss the
various options available, including the relatively new Small Business Restructuring Process.
(03:11):
After considering the options, the director agreed that the Small
Business Restructuring Process was the best option for him. And
after several discussions with myself and his accountant, he submitted
a restructuring plan to his creditors, which involved refinancing his
real estate and offering $0.25 in the dollar in full
and final satisfaction, which was a better outcome than the
(03:32):
estimated dividend in hypothetical liquidation scenario that I calculated. The
creditors accept this offer. The finance was obtained as it
was conditional upon creditors voting in favour of it. The dividend
was paid to creditors and provided the company with a
clean slate moving forward, I should add from my experience,
the ATO as the major creditor in most scenarios has
(03:53):
been very supportive of the Small Business Restructuring Process.
Gillian Bowen, Host (03:56):
Yes, right. I've got I've got I've got a couple
of questions about that later. But crack on.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (04:00):
No, it's it's and they've been supporting especially if the
companies employing can show that the major causes of its
financial distress was outside the director's control. So we're talking
COVID 19 over the last few years, but also put
in there natural disasters like fire, flood and even health
issues of the director or his immediate family, including in
this example, mental health, which is a big play in
(04:22):
society at the moment. And the ATO also wants to
know that the business is viable moving forward and has
cash flow forecasts to support this, to support it moving forward.
Gillian Bowen, Host (04:34):
Jill, what are your takeaways from
hearing that real world example?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (04:39):
It's the collaboration. I think a lot of our members
are a bit concerned they'll lose a client, but as
we've just heard from Andrew, it's about working together as
a member support your clients to get the right help
at the right time and as soon as possible. So
the accountants saw the red flags, sat with their client,
(04:59):
talking to Andrew, work together to decide the best option,
and then supported the business through it. Yes, Andrew took
over the restructuring to deal with the creditors and manage
the plan. That's his job. But the accountant was there
keeping that business running day to day and looking viable
into the future.
Gillian Bowen, Host (05:17):
Jill, can you also now give me a quick explainer
of what the small business restructuring process is and how
it saved in this instance, what Andrew was talking about,
that client's business.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (05:31):
Oh, gosh, what, in 30 seconds or less?
Gillian Bowen, Host (05:34):
That's right. I do have a timer on as those listening
along will know.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (05:37):
I think the key
things is about getting your business back to business. So
in essence, there are criteria. You have to have total
debts of less than $1 million. You have to have
your tax lodgement pretty much up to date and you
have to have paid or can pay any entitlements of
your employees that are due and payable, such as their superannuation.
(06:00):
Now if you're in that position, but you can see
financial hardship on the horizon or in fact you possibly
pretty much looking at insolvency right now. Get talking about
it because if you sit with your accountant and call
in the specialist, the registered liquidator, they can help you
navigate that journey if you've got a viable business. That's
(06:22):
the key thing here, Gill. You've got to have a
viable future. Well, let's get the debt sorted and clear
you to move ahead, and that's what saves the business,
acting early.
Gillian Bowen, Host (06:33):
So, Andrew, people listening along might be thinking then what
is the difference between a small business restructure and voluntary administration?
Can you explain that difference?
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (06:44):
Yes. As Jill has mentioned, the Small Business Restructuring Process
is only available to small businesses with debts of less
than $1 million and who meet the eligibility criteria. However,
the main difference between the small business restructuring and the
voluntary administration is that the directors remain in control of
the day to day operations of the business whilst going
through the small business restructuring process. Compare this to the
(07:07):
voluntary administration scenario where the administrator takes control of the
trading as he's personally liable for any debts incurred. (He
or she.) He or she. Sorry. Yes, the the reg
the administrator is personally liable for the debts incurred. But
as a result of this, as the directors remain in control,
this result in cheaper costs, professional costs being incurred under
(07:29):
the small business restructuring process compared to the voluntary administration.
And in addition, the directors are more comfortable and responsive
by the fact that they are left in control of
the day to day of business affairs rather than effectively
being put on the sidelines by a voluntary administration process.
So basically it leaves the directors doing what they do best,
(07:49):
their trade or profession and the restructuring practitioner doing what
they do best, saving companies and businesses.
Gillian Bowen, Host (07:54):
Okay.
Okay. So then, Jill, and
you touched on this a little bit already, I think,
but what is it that's holding back our members and
then in turn their clients from using this process that
Andrew and you have been explaining today?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (08:08):
I think the first one is not being aware of it. Okay.
For our members in particular...
Gillian Bowen, Host (08:12):
tick, tick.
Listen to this
Podcast, share it with all and sundry. Continue on. Yes,
what else?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (08:18):
I think our members tell us that when they start
these difficult conversations with their clients, the clients stop coming
because they probably can't pay their accountant's bill. But the
upside of this process, if you meet the eligibility criteria,
it's a positive conversation. What we're talking about is we
can actually, if all the things happen correctly, keep your
(08:39):
business going. But for the directors and I think sort
of Andrew's alluded to it, we have to remember at
this end of the business scale, the business is their life.
It's what pays their rent. It's what puts food on
the table for the family. It's not something separate from
their day to day world. So it is a very
difficult decision. So just to call out to our members
(09:00):
is really keeping conversation with your clients, understand what's impacting
their business. We talk about the pandemic, but let's be honest,
we can have roadworks set by a local council that
go for 18 months instead of six months. You yourself
might have, I think, Andrew's example there was a divorce
and stress in the family. Anything that's outside of your
(09:22):
control that affects your business, seek help early and members
don't hesitate to speak to the experts. Remember, your registered
liquidator probably is already a chartered accountant and then has done extra,
I think it's 4000 hours just in insolvency to even
apply to get what we call their ticket. So trust them,
(09:43):
call them in early and have that conversation.
Gillian Bowen, Host (09:47):
Well, that then.
leads me to what I'm thinking next Andrew for members
who are listening along today and who have a client
who really need to get involved in this process, what
is step one?
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (09:58):
A member should always be proactive with his clients. They're
the trusted advisor and if they see any early warning
signs of financial distress, early intervention maximises the chance of
restructuring and saving the business. The members listening should be
asking themselves that if they have any clients on the
ATO payment plan for, for example, whether or not that
(10:18):
payment plan is actually in the best interest of their clients,
especially if it's a significantly affects their cash flow and
they need to consider what the other options are, including
the Small Business Restructuring Process. If they identify a problem,
they should reach out to a registered liquidator to obtain
professional and qualified advice and to discuss the options available.
(10:39):
My firm, Rodgers Reidy, really like many other insolvency and reconstruction firms,
offer an initial consultation obligation and cost free.
Gillian Bowen, Host (10:47):
Okay, that's interesting. Cost free. I do enjoy that aspect
of it. But Jill, is there anything else you'd like
to add?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (10:53):
I think just a call out to directors. Look, I
know it's difficult. You spend all your day running your business,
but what the one thing you've got to keep your
eye on is your cash flow. And you've got to
be looking forward with that. If you see any bumps
in the next two months, that's when you start talking
to your accountant. Let's get ahead of these bumps and
make sure you stay contributing to the economy.
Gillian Bowen, Host (11:16):
Good points there, Jill. Andrew, how do you go about
finding a registered liquidator.
And why should you use one?
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (11:24):
To act as a small business restructuring practitioner, as you've indicated,
you have to be a registered liquidator and they have
to be registered through ASIC - the Australian Securities Investment Commission. Simple
Internet search on the words registered liquidator will take you
to the relevant web page at the ASIC website, which
has an Excel workbook listing every registered liquidator by state.
(11:46):
So you can do a search by by your locality
to find out who's closest to you if need be.
In addition, and for most for extra comfort, most registered
liquidators are members of a professional body. My case, CA ANZ
and I also members of an insolvency and reconstruction organisations
such as the Australian Reconstruction Insolvency Turnaround, or the Association
(12:08):
of Independent Insolvency Practitioners.
Gillian Bowen, Host (12:10):
Okay, that's good. All right. So there is a place to
find
information and we'll put
all the links to that in the show notes so
don't worry about having to jot it down right now,
we'll make them hyperlinks. Jill, I want to come back
to the ATO. I mean, in Andrew's example.
The ATO is,
getting ends up getting less than what they potentially would
argue they were owed. Why does the ATO accept this
(12:30):
restructuring process?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (12:33):
Because they're commercially savvy and if a viable business keeps operating,
they keep paying tax. And I know not everyone will
believe this, but the ATO does want you to survive,
but you've got to chat to them early that this
is the key. And secondly, why this process in particular?
Because it means the directors have been proactive. That's a
(12:56):
tick for the ATO to start with. It also means
the ATO will get back more of their tax dollars
that were due at the time this process started. So
statistics are already telling us that the average return is
$0.15 in the dollar. Now if you don't do anything,
can you go through another external administration process, possibly end
(13:17):
up in liquidation in any of those the ATO walks
away with? Now, let me check. Oh, that's right, $0.00
in the dollar. So it's a very attractive proposal to
the ATO who actually want a viable business to keep
employing and keep paying tax.
Gillian Bowen, Host (13:33):
Okay. Well, Andrew, the other question I think that
people might be thinking as they're listening along is that
the registered liquidator will then take clients away from the accountant.
Explain why that's not the case.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (13:44):
This is definitely not the case. And in fact, especially
under the small business restructuring process, we often see the
member's client become a better, more efficient client without the
headache of significant taxation liabilities and other debts and the
associated issues that come with dealing with those creditors, including
the ATO. Not to mention the goodwill of a successful
(14:04):
restructure can create between the member and their client as
a result of dealing with financial problems faced by the client.
I often find it's a three way partnership between myself
as a restructuring practitioner who is often only involved for
a short period of time. The member who normally becomes
involved in the turnaround strategies and their implementation, together with
(14:25):
the ongoing monitoring, monitoring of their clients and the client themselves.
In addition, most insolvency and reconstruction firms are specialists that
don't have a taxation business service or audit division. So
members don't need to be worried about the client being
pinched from them. And as mentioned earlier, the restructuring process
often results in a better overall client for their members
(14:46):
moving forward.
Gillian Bowen, Host (14:46):
Okay. That sounds that sounds like it's a it's a
win win in a tricky situation.
Jill, how do you see the roles of the chartered
accountant and the registered liquidator working together?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (14:56):
I think our members can I say the canary in
the coal mine? It's an old saying, but that's their job.
You know, see those red flags, open up the conversation
as soon as you can. And if you need to
call in, support the specialist, do direct your client to
the right people. So our members have a key role
(15:17):
in making sure directors facing financial stress don't buy into
the Google
your company. That just leads to horrendous trauma later down
the line. So members, make sure you know who your
clients need and connect them early. Now for the registered liquidator,
(15:40):
as you've heard from Andrew and myself, they're highly qualified,
they're highly regulated, they have a breadth of experience and
they can manage creditors. So get them on your team early.
Gillian Bowen, Host (15:50):
We are rapidly running out of time. Andrew I just
wanted to quickly.
Touch on what are the costs here.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (15:55):
The cost of conducting a small business restructuring, it varies,
depends on the fact matters and circumstances. However, generally it's
approximately about 5 to 10% of the total debts, which
means between 25 to $0.35 in the dollar. A small
business can deal with its debts in full and final
satisfaction of all those claims, including costs.
Gillian Bowen, Host (16:14):
Okay. All right. So and Jill, why is this topical
at the moment?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (16:19):
Primarily because there's a call from the industry to government
to start bringing together both the corporate insolvency, which is
what we're talking about today and the personal insolvency systems. Why?
Because the assets of those directors at the small business
end are their personal assets, so there's got to be
some harmonization between the two.
Gillian Bowen, Host (16:40):
All right. Look, we are out of time. Is there.
Anything else that
you want people to know about Jill, just before we
wrap up?
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (16:46):
Act early.
Gillian Bowen, Host (16:47):
Act early. I love it. The other thing I will
let you know is that everything
that the team has talked about today, we will put
in the show notes. There is a lot to learn
in this episode and I don't want you to miss
a thing. So the links will be in there and
they'll be hyperlinked and take you to what you need
on our website and elsewhere and share this episode with
your clients who want to understand more about the process
(17:08):
and what it'll mean for them. Also, have you listened to
the other episodes from Season Three? Episode Three has been
very popular. It's on accountants financing letters. There's also a
useful episode on cyber security for SMPs and one on
the ATO changes to work from home deductions, plus an
explainer on a great development for CA ANZ the ability to
(17:29):
use FEE-HELP to help cover the course fees for becoming
a chartered accountant. Follow the pod to find them or
click the links on the show notes that I will
put there for you. The podcast has an email as well,
so feel free to get in touch. podcast@charteredaccountantsanz.com Let's start
a conversation. Thank you Jill and Andrew for being my
experts on Small Firm, Big Impact.
Jill Lawrence, CA ANZ Senior Policy Advocate for Business Reform (17:50):
Thanks Gill.
Andrew Barnden FCA, Registered Liquidator and trustee in bankruptcy (17:51):
Thanks and have a great day.
Gillian Bowen, Host (17:53):
Bye bye.
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