What are the common myths of company restructure?

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Company restructure means voluntary administration, liquidation or receivership. Most importantly, it can be planned or unplanned. The directors and owners can be informed and prepared for the administration, liquidation or receivership and rescue their business and protect their assets and wealth… or not.

Myth 1: Restructure (liquidation, voluntary administration) is an admission of failure and results in the destruction of business assets and income streams.

False. Liquidation of the company shell is not necessarily the end of the business nor indeed the end of the directors’ and shareholders involvement. In fact administration, liquidation or receivership can allow the renewal and freeing up of the business and the assets. It can mean the continuation of the business without the burden of the liabilities that have stopped it reaching its true potential. It can be an opportunity to shed the dead wood of non-performing staff and divisions. Ask us how!

Myth 2: Once a director is on the record with a liquidated company his reputation and borrowing capacity is battered.

False. The reason limited liability companies were created was to insulate people from personal responsibility. As long as a director has acted honestly and properly, there is no reason he or she cannot continue in business as a director or successfully apply for loans. Check with us regarding your relationship with the company and transactions you have made in case anything should be rectified before making any decision.

Myth 3: Once my company goes into liquidation I will necessarily face high levels of scrutiny from the liquidator, ASIC and the ATO, particularly if the company owes tax and super.

Partly true. But it is not commercially feasible to investigate every company that is liquidated. If there are no funds left in the company when it is liquidated, then it is extremely unlikely that any significant investigations will take place. (Can you imagine the reluctance of creditors putting their hands in their pockets to fund investigations by a high cost liquidator?) The ATO knows companies are going to fail and even if they are the only creditor left unpaid, as long as due process is followed, it is unusual for them to pursue a dead horse. But don’t leave behind matters that the liquidator will have no alternative but to investigate.

Myth 4: The only ones who ever benefit from company administrations. liquidations, and receiverships are the liquidators and the lawyers.

True in the vast majority of cases. UNLESS the restructure is planned and designed to preserve business wealth. Naturally if the administrator, liquidator or receiver is given a free go at the assets of a company and can write his own task list and decide how many hours of his time the matter warrants (at up to $400- 700 per hour) and the lawyer is engaged (at up to $750 an hour for mere solicitors) then all sorts of temptations to rort arise. But if there is someone equally experienced and qualified advising the directors and shareholders, ensuring the assets and income streams are preserved and are maybe not easily available to ‘cash in’ and looking over their shoulder asking what and why, this happens less often. Ask us how.

Myth 5: The administration, liquidation or receivership necessarily ties up the directors and company assets in a kind of limbo for years.

Again this can be true. But not if the process is planned in advance to work for the directors and shareholders and not only for creditors by experienced experts who know how it can be made quick and easy with the cooperation and input of the directors. Ask us how.

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