In March, there were still over 370,000 business and 1 million employees taking advantage of JobKeeper. This includes around 110,000 businesses who’s revenue has dropped 75% and nearly 90,000 employees who are working no, or virtually no hours.
So now that JobKeeper has ended what will happen to those businesses who relied on it?
Hopefully businesses have prepared for JobKeeper ending and have already reduced costs or found new streams of work as necessary. But no matter what steps a business has taken, the end of JobKeeper can cause significant problems. The options for those businesses include:
Small Business Restructuring
Businesses can take advantage of new Small Business Restructuring laws. Using these laws, a company director can keep running the company’s business but engage a Small Business Restructuring Practitioner to put a proposal to creditors to settle their debts. This process can be a cost-effective way to deal with historical debts and if it is passed, it is binding on all unsecured creditors.
To be eligible for Small Business Restructuring a company must have creditors of less than $1 million and must have no material overdue employee entitlements or tax lodgements.
Voluntary administration can be used to formally settle creditors’ claims and reduce a company’s overall debt level. However, in a voluntary administration, an insolvency practitioner is appointed and they take control of a company’s business for a period of about a month and the directors lose control.
Voluntary administration may be an appropriate process for companies who are not eligible for Small Business Restructuring.
This article contains an example of a company impacted by Covid-19 which we helped rescue through voluntary administration.
Some of the benefits of appointing a liquidator to a company, include:
- Avoiding personal liability under a Director Penalty Notice issued by the ATO;
- Limiting or reducing the directors’ liability for insolvent trading;
- Limiting or reducing the directors’ liability for certain offences under the Corporations Act 2001;
- Shutting down an unprofitable business; and
- Conducting an orderly winding up of an insolvent company’s affairs.
More information about liquidation can be found here.
Settle Debts Owed to Creditors
We can help you negotiate settlements with creditors. We will usually provide creditors with a summary of your company’s financial situation, and details of what we estimate they will receive if the company be placed in liquidation. This can often be that there will be little or no return.
Generally, creditors are open to negotiating a settlement of their debt. This is because other businesses are aware of the financial impact of Covid-19 and the risk of receiving a limited return in liquidation.
More information this process can be found here.
Contact us for Assistance
If believe that your company will have difficulties paying its debts now that JobKeeper has ended please get in contact with us by phoning 07 3221 0055 or by contacting our Brisbane or Gold Coast office. Our experienced staff will be able to assist you.