We ascertain the financial position of the business, identify risks to directors and owners, evaluate strategies for dealing with creditors and scenario plan.
All necessary accounting and legal expertise is utilised to give the business owners and/or directors a clear understanding of their current position and future options.
This is a confidential process that is protected by legal professional privilege.
Time period for deliverable: One month
Most business owners don’t get a thorough and professional diagnosis and set of options when their business faces a cash flow crunch. The result is that circumstances and creditors decide the future of the business and the owners lose the opportunity to restructure their business to save goodwill value or undertake an orderly exit.
What do we do? Key deliverables of the assessment
- Talk to you about your business and go to your business premises
- Review your accounting software and the quality of record keeping
- Review your legal documents and business asset records
- Explain informal restructuring and formal insolvency options
- Analyse whether you face personal risk to your assets
- Discuss the chances of success of your options based upon our practical experience
- Identify litigation risks such as insolvent trading and voidable transactions
- Help you to evaluate the best option for your circumstances and objectives
The Government has recognised that there is a market failure in the delivery of competent viability reviews for businesses that turn over up to $10 million
Kate Carnell, 29 September 2020, (at that date the) Australian Small Business and Family Enterprise Ombudsman:
“Small businesses need access to an accredited professional adviser such as an accountant or bookkeeper to judge the viability of the business now. This is the critical first step that the small business owner needs to take so they can make an informed decision about the future of their business.”
Our firm Principal, Ben Sewell, explains that in the past lawyers have failed to address the need for a viability review:
“When I worked in a large law firm as a junior insolvency lawyer I would sit in on meetings with business owners who were petrified about their troubled business collapsing. They would leave the meeting disappointed after getting a lecture about insolvent trading and being handballed to a corporate undertaker. In other professional fields, treating a distressed client this way is unthinkable. It would be like an oncologist lecturing a smoker about their “bad” habit and then telling them to euthanize rather than exploring the process of fighting cancer. At that critical time the business owners would have been better served by obtaining a holistic review of the viability of their business and also advice about whether their personal assets were at risk.”
Our review is designed for a business with one or more of the following symptoms of distress
- Business has a shortage of working capital and is facing insolvency risk
- Sweat capital and money is tied up in the business
- Owners are concerned that their personal assets are at risk
- Business has significant tax debt and other liabilities
- Legal action is on foot by creditors and/or stakeholders
- Cash flows have been disrupted by a failed project or the loss of a key customer
- There has been a fraud or the personal relationship of the business owners has broken down
- The business owner’s capacity to manage the business has been limited by a health issue
What are the features of the review?
- Review of financial position and the reliability of accounting information
- Consideration of the quality of the legal structure of the business
- Protection of legal professional privilege to allow frank discussions
- Realistic assessment of the prospects of a formal insolvency solution such as voluntary administration
- Evaluation of financing alternatives to meet working capital deficiencies
- Assessing personal risk areas for the directors including personal guarantees, voidable transactions and tax penalties
- Reading statements of claim and defences for litigation already commenced and considering prospects and litigation strategy
- A root cause analysis of the overall viability of the business
Why do clients call us?
Because other professional advisers don’t offer a holistic review
- Their accountant is busy servicing 100 clients and isn’t an insolvency specialist
- An insolvency practitioner doesn’t advise directors about their personal interests and doesn’t conduct thorough due diligence about the director’s best options
- Their commercial lawyer isn’t going to get into the business issues faced and limits the scope of their services
- Financiers are offering last resort lending with high interest rates but this would only be a temporary solution
- Someone who is expecting a referral fee recommends clients to an “expert” who doesn’t seem to have any relevant qualifications or a track record of success