Quick Snapshot
- Industry: Signage and plastics, Melbourne VIC
- Total Debt: $360K ATO plus director’s loan
- Strategy: Pre-Pack Restructure
- Outcome: ATO debt resolved, business continued
The business was doing well. The debt behind it was not.
For years, a signage and plastics company in Melbourne traded profitably while a $360,000 ATO bill grew quietly in the background. There was simply no realistic way to pay it off from trading alone.
The Situation
The director ran two trading companies in the signage and plastics sector. Both were viable and profitable. But the ATO debt had built up over several years and would never clear from cash flow. He also owed a large sum to his own companies through a director’s loan, money he could not repay personally, leaving him exposed if either company was taken through a wind up.
The Problem
- A $360,000 ATO debt that trading income would never clear
- The liability still growing despite the business performing well
- A director’s loan the director could not repay personally
- Real personal exposure if either company was taken through a wind up
The Solution
de Jonge Read® identified a Pre-Pack Restructure as the right path. A pre-pack restructure is a process where the viable parts of a business move into a new company, so trading can continue while the old company’s debts are resolved through liquidation, a formal wind up that brings the debt to finality.
This involved:
- Moving the business assets and operations into a new company so trading could continue
- Taking both original companies through a controlled wind up to resolve the ATO debt
- Settling the director’s loan commercially to remove his personal exposure
- Securing the director’s personal property through an independent market valuation, structured to withstand scrutiny
The Outcome
- $360,000 ATO debt resolved in full through the wind up of the old companies
- Director’s loan settled commercially, removing personal exposure
- Personal property secured following an independent market valuation
- Business continues trading through a new company on a clean footing
Key Lesson
A business can be trading well and still carry a debt it will never pay off. The time to act is while the business still has value worth protecting.
If you are running a profitable business that is still carrying a tax debt you cannot see a way to repay, a no-cost conversation with de Jonge Read® can clarify where you stand and what options remain. Call 1300 765 080.
This pre-pack restructure helped a Melbourne signage and plastics business resolve $360,000 in ATO debt and protect the director’s personal position while keeping the business trading.
Should you have clients or associates that you know are struggling with financial issues or need assistance in reviewing their business affairs in preparation for what’s around the corner, our team of Strategists would be pleased to discuss options that are available on how to best design and implement insolvency strategies. Contact us now on p. 1300 765 080 | ua.moc.arjd@ofni
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
