How a restructuring deal gave a new spark to this electrical contracting business

Two directors of an electrical contracting business on the Gold Coast found out how it’s do-able to undo with turnaround experts with the Small Business Restructuring solution.

A series of events over 2020-2022 financial years impacted its financial position and performance. These included:

• debtors becoming more difficult to collect
• staff being sick or quarantined due to COVID-19
• sales, and supply shortages, which made it impossible to obtain necessary stock.

The debt accrued and creditors involved were:

1. ATO for approximately $310,000.
2. Queensland Rural & Industry Development Authority (QRIDA) for $100,000.
3. Suppliers and banking institutions totaling $230,000.

The ATO issued director penalty notices to the company directors after the company failed to maintain its latest payment arrangement.

The directors took several steps, including engaging an external CFO and bookkeeper, expanding their services to work directly for customers, and employing an office manager to assist with debt collection. But they still needed help to seek creditor support to agree to a restructuring plan.

The directors appointed the team at Worrells Gold Coast ( Jason Bettles & James Robba ) as the company's small business restructuring practitioners to help formulate the terms of the offer to be put forward under the restructuring plan. The directors contributed a one-off lump sum payment, which would result in all creditors receiving approximately 20 cents for every dollar owed by the company. This offer was a commercially favourable return when compared to a scenario where the company was to be put into liquidation.

Creditors accepted the offer, and the company directors immediately paid out the funds due to creditors under the restructuring plan. As a result, the small business restructuring process allowed the company to deal with its legacy debts, which, together with the other steps being undertaken by the directors, will help to ensure its future viability. The directors also avoided personal liability from the ATO's prior director penalty notice.

This case study is a perfect example of how taking proactive steps to address financial challenges and getting turnaround experts on board can help to ensure future viability.

As always, the sooner you seek options, the more you’ll have. The Teams at Worrells are ready to help. Our people know how to turn a business around, understand insolvency at the deepest level, and are always keen to find the right answers.

Business can be tough. Before you throw in the towel, we help you consider what can be done to turn around a business first, exploring restructuring options that can buy you valuable time to get back on your feet.