Quick Snapshot
- Industry: Hospitality (Food & Beverage)
- Location: Sydney, New South Wales
- Total Debt: $3.5M (ATO debt)
- Outcome: ~79% debt reduction, business continued trading
The Situation
A Sydney-based food and beverage (F&B) business approached de Jonge Read® during a period of increasing financial pressure across the hospitality sector.
Rising interest rates and reduced consumer spending had impacted revenue, contributing to ongoing cash flow challenges.
The business had accumulated $3.5 million in ATO debt, placing its viability at risk and creating uncertainty for both the directors and employees.
The Problem
The company was burdened with significant tax debt and required a structured solution to address its liabilities.
While a Small Business Restructure (SBR) was considered, the business did not meet the eligibility criteria.
Without a viable restructuring option:
- The business faced the risk of insolvency
- Employee livelihoods were at risk
- The directors were exposed to potential insolvent trading claims
The Solution: de Jonge Read®’s Expertise
We identified a Voluntary Administration (VA) followed by a Deed of Company Arrangement (DOCA) as the most appropriate strategy to address the company’s position.
This approach provided a structured pathway to:
- Assess the company’s financial position
- Present a proposal to creditors
- Enable the business to continue operating under a revised arrangement
The Outcome
The implementation of a VA/DOCA strategy resulted in a significant reduction in the company’s liabilities while allowing the business to continue trading.
Key results:
- $~79% reduction in total debt
- $3.5M reduced to approximately $750K
- $2.77M in liabilities compromised
- Business operations preserved
- Director exposure to insolvent trading claims removed
Key Lesson
When a business does not qualify for a Small Business Restructure, alternative options such as Voluntary Administration and a Deed of Company Arrangement can provide a structured pathway to address significant debt and preserve operations.
If you are dealing with significant ATO debt, creditor pressure, or a business under financial stress, the team at de Jonge Read® offers confidential, no-cost initial advice to help you understand your options before the situation escalates.
This case highlights how hospitality businesses in Sydney facing significant ATO debt and financial pressure can use a VA/DOCA strategy to reduce liabilities and continue operating.
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.mo1775113940c.arj1775113940d@ofn1775113940i1775113940
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
