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 case study demonstrates how a DOCA was used to achieve a significantly better outcome for creditors in a time-tight situation. With only days before a winding up hearing, our team took a hands-on approach — coordinating stakeholders, navigating banking, legal and insolvency processes, and taking decisive steps to implement a solution within a highly compressed timeframe.
—
Our client, a Queensland based earth moving business engaged de Jonge Read after being served with a Winding-Up Notice from the ATO, with the hearing scheduled just days away. The company had a long-standing history of tax non-compliance, and the directors believed it was too late to avoid liquidation.
A closer review of the company’s position by de Jonge Read’s team revealed there was still value in the business. Work in progress, unencumbered assets and a core group of creditors meant there was a genuine opportunity to deliver a better return than liquidation. However, the challenge was clear: there was limited time to prepare, coordinate stakeholders and put forward a viable alternative.
In cases where liquidation appears imminent, it is essential to assess whether a better return can be achieved through restructuring. That assessment formed the basis of the strategy that followed.
Based on our advice, the client appointed an Insolvency Practitioner. Immediately following this appointment, de Jonge Read engaged directly with both the IP and the ATO. In conjunction with the IP, we were able to convince the ATO to adjourn the winding up hearing so the Voluntary Administrator had time to assess the company’s position and enable the director to put forward a Deed of Company Arrangement (DOCA) proposal.
We then engaged with the client’s bankers to explain the situation and request that no enforcement action be taken. The approach was supported by a plan to sell property assets and repay the bank’s secured debts of $1.6 million. The bank agreed.
Valuations of the company’s assets were obtained, which allowed us to accurately estimate the likely return to unsecured creditors in a liquidation scenario — around $100,000. This was critical, as it helped the us determine an appropriate offer under a DOCA: $150,000, payable over 12 months.
We also worked closely with the director and the administrator to validate family member loans and related party debts. These were substantiated through detailed documentation and were ultimately accepted by the administrator for voting purposes.
A key part of the process was engaging with creditors. We worked with the director to help explain the DOCA proposal, answer concerns, and build support ahead of the vote. Through this engagement, six unrelated creditors confirmed their willingness to support the offer, in addition to the related party creditors. Our firm assisted in preparing and submitting proxies from all supportive creditors to the administrator.
Results
-
DOCA was formally accepted by creditors
-
The director’s offer of $150,000 was approved
-
Creditors received 80 percent of the total settlement sum
-
The business avoided liquidation
-
A mediated settlement was reached with the ATO
-
The value of ongoing work was preserved through continued trading
Positive Outcomes
-
The ATO withdrew the winding up notice
-
The company remained in control of its operations
-
Business continuity was maintained
-
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 the process effectively.
—
This matter highlights what can be achieved when there is clarity of strategy, coordinated implementation, and the experience to manage sensitive stakeholder relationships. Our structured approach helped avoid liquidation, preserved business value, and ensured creditors received a significantly improved return.
Even at the final hour, options exist. Engaging specialists quickly can change the course of an outcome. Acting fast creates the space needed to assess alternatives, communicate with stakeholders, and develop a stronger proposal than liquidation might allow.
In this case, validating related party debts through clear documentation ensured those creditors could participate in the vote. A well supported DOCA offer, underpinned by accurate return comparisons and early engagement with all creditors, gave the administrator confidence and secured the required support.
While it is always best to seek professional advice as early as possible, this case shows it is never too late to influence the outcome. With the right team managing the process, even the most time critical situations can be turned around.
If you are working with a client who has received a winding up notice or is otherwise under pressure, consider whether a DOCA or similar strategy might deliver a better result. Acting early or acting fast can make all the difference.
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.mo1759944064c.arj1759944064d@ofn1759944064i1759944064
Did you know?
Phoenixing is another name of business restructure. Read more about business restructures and when this can be an option for you.
