Often many of the small businesses may come under financial crisis much before they can break even due to many different reasons. As a result, these companies may not be able to pay all their debts.
How to deal with insolvency?
If your company too is under liquidation Australia then the first thing you must do is appoint a voluntary administrator or liquidator, but there are few disadvantages of going for this option:
- Cost involved is quite significant.
- Your trading will immediately stop after appointing any liquidator
- If you want to continue with your trading then appointing any voluntary administrator can damage your relations with customers and suppliers.
- Liquidator may also pursue claims against director.
- In case you are in building industry then your licence may get cancelled.
- Appointment of voluntary administrator may lead to secured creditor appointing receiver to your company.
So, there are few other options for you too.
1. Negotiate settlements for payment plans
The best option will be to negotiate with all your creditors directly to arrive at your settlement amount as well as payment plan which is agreeable to both of you.
This option however works better, if you have to deal with only few key creditors only.
2. Contribute capital to obtain finance
This option may not be fruitful if you exactly do not know the reason for your company’s problem or you know the problem but you do not have any solution.
No point throwing away your money after bad business however if you are sure that with little investment, you can turn around then it will be nice to consider.
3. Develop profit and turnaround by adopting few strategies
Company’s success usually depends upon few key profitability drivers, but unfortunately, most of the company directors often fail to find this.
However, this is also an option that one need to find out to save the business.
4. Restructure or sell your business
If your company is presently in such situation that it can’t pay creditors, then entering into formal insolvency appointment looks inevitable.
However, there is another option and you can sell your company’s business to another entity who may in future trade profitably.
Such sale should occur before appointing any insolvency practitioner.
Hiring insolvency practitioners
You may consider following tips while hiring and insolvency practitioners.
1. Identify the need
Any company is insolvent only when it is not able to meet the financial liabilities. Once potential insolvency is fully recognized, then directors of the company is responsible for protecting the creditor’s interest.
Only in such situation, professional insolvency practitioner will be needed.
2. Check for insurance/license
While dealing with any insolvency practitioners, ensure that you are actually dealing with insured or licensed professionals.
3. Years of experience
You must have initial meeting and you must get the information about his past experience in this matter.
4. Select right insolvency practitioner
Make sure that the insolvency practitioner whom you are hiring for your purpose is capable enough to suit all your needs. You must also confirm about his professional fees.