When a company is served with a winding up notice, it often feels like the end of the road. In reality, there are still options available. Even when time is extremely limited.
This success story below shows how one business, under significant pressure, avoided liquidation and achieved a far better result by putting forward a Deed of Company Arrangement (DOCA). With only days before the court hearing, our team worked closely with the company’s directors, stakeholders and advisors to put forward a viable solution that was accepted by creditors.
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Our client, a Queensland based earth moving business, came to us after being served with a Winding-Up Notice from the ATO. The court hearing was only days away, and with long standing tax debt, the directors believed it was too late to avoid liquidation.
After we reviewed the company’s financial position, it became clear there was still value in the business. There was ongoing work, unencumbered assets, and a core group of creditors that might support a proposal if one could be developed quickly. The challenge was time, and how to act fast yet thoroughly.
In situations where liquidation seems inevitable, it is important to ask whether there is a better way to achieve a fairer outcome. In this case, there was.
What We Did
Based on our advice, the directors appointed an Insolvency Practitioner. We immediately worked with the IP and the ATO to request an adjournment of the winding up hearing. This gave the company space to appoint a Voluntary Administrator and prepare a DOCA. A DOCA is a formal proposal to repay creditors under agreed terms.
We then approached the company’s bank to explain the situation. A plan was put forward to sell property assets and repay secured debts of $1.6 million. The bank agreed not to take enforcement action.
To support the DOCA, we arranged formal asset valuations. These allowed us to estimate that if the company was placed into liquidation, unsecured creditors would receive around $100,000. Using this information, we assisted the director in putting forward a $150,000 return to creditors, payable over 12 months. This offer was only possible if the business continued trading.
We also helped the director validate loans from family members and related entities. These debts were properly documented and accepted by the administrator for voting purposes.
We worked with all creditors, both related and unrelated, to explain the proposal, answer questions, and build support. Six unrelated creditors confirmed they would support the offer. Turnout matters in a process like this. We assisted in preparing and submitting the necessary proxy forms to the administrator. Ensuring that supportive creditors are properly represented can make all the difference to the outcome.
Results
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DOCA was formally accepted by creditors
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The director’s offer of $150,000 was approved
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Creditors received 80 percent of the total settlement sum
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The business avoided liquidation
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A mediated settlement was reached with the ATO
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The value of ongoing work was preserved through continued trading
Positive Outcomes
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The ATO withdrew the winding up notice
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The company remained in control of its operations
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Business continuity was maintained
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Jobs were saved
Our high level of expertise in both project management and negotiations was crucial in achieving this result. The complexity of these matters requires a skilled and experienced specialist to manage all moving parts effectively.
What This Means For You
Even at the final hour, options exist. Engaging experienced specialists quickly can change the course of an outcome. In this case, fast action created the space needed to review the company’s position, communicate with stakeholders, and put forward a workable proposal.
By putting together clear documentation of debts, especially related party loans, our team gave the administrator confidence in the offer. Our detailed comparisons between liquidation returns and the DOCA scenario helped creditors see why the proposal made commercial sense. And with our team’s engagement with all creditors throughout the process, the offer received the support it needed.
While early advice is always ideal, this case proves that it is never too late to take control of the situation. With the right guidance, even businesses under extreme pressure can recover.
If You or Your Business is Under Pressure
If your business is facing a winding up notice, tax debt, or other financial challenges, know that you’re not alone and that help is available. Acting early or acting fast can make all the difference.
Speak to our team today to explore the right solution that could protect your business, repay creditors fairly, and avoid the long-term consequences of liquidation.
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
