mothball [verb] – to withdraw from use or service and keep in reserve; to stop work on an idea, plan or job, but leaving it in such a way that you can start on it again at some point in the future.
Many businesses are facing major disruption to revenue and profitability, which cannot be overcome during the period of coronavirus disruption. In various industry sectors it is not possible for businesses to adapt and continue trading at present. Businesses most affected are those in sectors where government policy requires them to cease trading or where demand for the goods and services they supply has otherwise evaporated.
No-one can be certain of the timeframe for coronavirus disruption to business to dissipate. However, when it does there will be opportunities in many industry sectors including those most adversely affected at present. At that stage, businesses that can regain momentum quickly will have an advantage over competitors.
Where businesses are not currently viable, owners need to ask themselves a number of questions and assess their options:
- Do they foresee opportunities when some normality returns to their industry sector?
- Can they ‘mothball’ their business until then?
- What needs to be done to preserve and best position their business to resume trading?
- What arrangements can be made with creditors and other stakeholders?
- What personal debt exposure do the owners have?
The flowchart below provides a general decision-making framework for a company with a business that is not currently viable due to coronavirus disruption.
Business owners who seek to ‘mothball’ their business may need to negotiate a moratorium on debts and other arrangements with various stakeholders such as landlords, financiers, trade creditors, the ATO and employees. The expected outcome from liquidation or bankruptcy and the current economic circumstances will provide a basis for negotiating arrangements with stakeholders.
If commercial tenants go out of business, landlords will be unlikely to obtain replacement tenants whilst coronavirus disruption continues and perhaps for a significant period thereafter. In these circumstances it will be in the landlords’ interests to agree to rent relief arrangements, which will enable their tenants to resume trading at some stage and continue their tenancy.
Many business owners are facing significant financial challenges and they will need advice and assistance in assessing their options and conducting negotiations with creditors and other stakeholders.
Pearce & Heers is here to help with providing advice, assistance and solutions for clients experiencing difficulties. In the event of a business lock down we will remain contactable via our office phone number 07 3221 0055 and other usual methods. Contact details for our senior staff are below.
|Mark Pearce||M 0408 402 685||E email@example.com|
|Michael Dullaway||M 0404 155 844||E firstname.lastname@example.org|
|Andrew Heers||M 0417 256 001||E email@example.com|
|Neil Mitchell||M 0478 126 885||E firstname.lastname@example.org|
|Mark Davidson||M 0406 899 780||E email@example.com|