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Risk management during COVID-19 (Coronavirus)

With the global impact of Covid-19 (Coronavirus) disrupting supply chains to the global economy, it may be increasingly difficult for business owners to navigate through this new reality. In the face of a pandemic, it is important for businesses to assess and manage the risks that may arise from workplace safety to financial distress. Below are some examples of measures businesses should consider when managing risk:

COVID19 workplace risks

  • Control the risk of transmission through safe COVID19 workplace practices;
  • Encourage and enforce high hygiene practices within the workplace;
  • Provide adequate hand sanitizers within the workplace;
  • Ensure employees are adequately spaced apart (the recommended distance is one employee per 4 square metres);
  • Provide hand sanitizers and masks to employees who catch public transport;;
  • Ensuring proper processes are in place for cleaning shared spaces, tools or equipment.

Cyber risks

  • Ensure remote access systems are fully patched and secure;
  • Ensure that you are making regular backups of your system;
  • Ensure you have appropriately trained professionals who can respond to cyber attacks;
  • Ensure you have on-site security controls are still applied to remote usage systems.

Business operational and financial risk

  • Conducting a regular cash flow analysis and forecast to ensure you are on top of all your debts;
  • Consider developing a restructuring plan, such as a plan to optimise operational costs;
  • Identify key threats to your supply chain and prepare for them;
  • Have a disaster recovery plan as a backup; and
  • Check the readiness of infrastructures and systems on handling a large number of employees working remotely.

We recognise that these are uncertain and challenging times for your business. If you would like more information on managing risk or what options are available to reduce financial distress then please speak to one of our professional and experienced advisors from CRS Insolvency Services. Contact us on our 24 hour advice hotline on 1800 210 073.

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Temporary relief from directors’ personal liability for trading while insolvent during COVID-19

The impact of the bushfire season to now COVID-19 can be seen financially distressing for many companies. You may be concerned about how this may affect your duties as a director and being personal liable for trading while insolvent.

On 23 March 2020, the government announced measures to assist businesses facing financial difficulties under these current economic circumstances. This includes providing temporary relief for directors from personal liability for trading while insolvent.

Directors will be given 6 months relief from their duty to prevent insolvent trading. However this relief will only be related to debts incurring in the ordinary course of the business during the 6 month period (i.e. debts necessary to facilitate the continuation of the business) and will not impact the requirement to repay the debts.

These temporary measures will not affect other duties owed by the directors nor the underlying financial position or long-term viability of the business. However, directors will need to determine whether the business is suffering from temporary liquidity challenges or if there are other serious underlying issues, and consider their longer-term options. Some of these options include looking at the ‘safe harbour’ protection to help you restructure your business, considering voluntary administration or liquidation. If you would like to learn more about strategies you could use to avoid panic and financial disaster resulting from COVID-19 please click here

We recognise that these are uncertain and challenging times for your business. If you would like more information on the temporary relief measures put in place or what options are available to reduce financial distress to your company then please speak to one of our professional and experienced advisors from CRS Insolvency Services. Contact us on our 24 hour advice hotline on 1800 210 073.

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What are the steps in voluntary administration?

When your company is faced with financial distress and insolvency issues, voluntary administration may be one of the solutions to consider. Voluntary administration is designed to keep your company afloat and improve the company’s financial position with the assistance of a qualified administrator. Here is a easy summary of the steps in voluntary administration:

Step 1: Initiation from directors

The decision to appoint an administrator will be done in writing and through a board resolution. A company may also be placed under administration by a liquidator or secured creditor. When the administrator is appointed the voluntary administration will begin.

Step 2: First meeting with creditors

The first meeting held with creditors is required to be held within eight business days after the voluntary administration begins. In this meeting creditors can vote whether to replace the administrator that the company has chosen, which will require written consent from an alternative administrator post meeting.

Step 3: Investigation and business report sent to creditors

After the meeting, the administrator will take over the company’s assets and affairs, the right to run the business and investigate the status of the company and send a report to the creditors.

Step 4: Second meeting with creditors

The second meeting is required 20 to 25 days after the administrator was first appointed. The purpose of the meeting is for the administrator to present their report and the creditors to vote on the following options:

  1. Return the company back to the directors, or
  2. Enter a deed of company arrangement, or
  3. Place company in liquidation

If you would like to learn more about voluntary administration or considering appointing an administrator you should contact us on 1800 210 073. Our insolvency hotline is open 24 hours 7 days a week.

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Strategies Businesses should consider in order to avoid panic and financial disaster as a result of the Corona Virus

The Corona Virus fallout is going to materially affect many businesses including sole traders, partnerships, corporate organisations in the Small and Medium Enterprise space, Large corporate and listed organisations and many Government agencies.

What is certain is that they are all facing similar challenges that have arisen a result of the onslaught of the global Corona Virus and the collapse of global financial markets.

In my view, if we panic the situation will only escalate and drive further negative sentiment and uncertainty.

The difficulty for all those organisations, their owners and stakeholders is to determine how long the position will take to rectify and what steps and planning are necessary to manage the situation which most people and businesses have never had to face previously.

In order to address those issues, besides for taking the relevant and appropriate suggested steps in relation to health and operational issues, those organisations will be forced to assess their current financial and market positions, plan and take steps required to mitigate their future positions and in the event that where the businesses are going to be so severely impacted, they will need to take external advice from the relevant professionals such as accountants, lawyers and others, depending on the industry sector or specialisation the business may be involved in.

Many businesses small and large may unfortunately need to close or go bankrupt, but the endemic issues facing those organisations were likely to have existed prior to the Corona Virus invasion.

In relation to that advice, key issues will need to be considered and those advisers will be required to assist their clients in a way that may well be outside of their normal professional expertise. They in turn may be required to engage with other industry experts and provide collaborative and strategic advice to their clients. Therefore, looking at the current scenario and applying some basic business concepts, organisations and their key stakeholders should consider key issues, which could include the following:

  • Cash flow in relation to the current and expected future position what steps would they be required to take to ensure they have sufficient cash resources to deal with their businesses being interrupted for at least 3-6 months (hopefully no longer);
  • Managing financiers including the banks, trade and asset financiers, insurers and others to ensure those financiers are kept fully informed of the business situation, the owners and managers financial and personal positions and what steps are being taken by them to address the current, future and other issues;
  • Other stakeholders would include, employees, customers, suppliers and landlords;

In relation to Bankers and financiers – these stakeholders are aware of the global crisis and should be engaged as soon as possible. It is expected that they will have an understanding and provide empathy to customers who may not be able to meet their ongoing commitments in a normal fashion or to comply with their existing facility covenants, until the situation rectifies itself. This assistance may include payment and interest moratoriums and where possible agreement to approve reasonable facility excesses or bridging loans. Clients will however be required to provide reliable and accurate financial and other information in order to succeed with the support they require.

In relation to suppliers, (even where they are facing similar situations), they should be encouraged and requested to provide ongoing support which may include continuing delivery of goods and orders in order to maintain their customers trading ability and provide ongoing commercial credit to enable the customers to manage payments during these extremely difficult circumstances.

Employees – most organisations are taking the necessary steps to protect employees and their families and discourage exposure to unnecessary business and social interaction by temporary closure of offices with staff working from home. Those who are not able to do so, are putting in place World and Australian Government Health Organisation guidelines to provide the safest work place environment possible. What will be vital, is to communicate clearly and provide employees with assurances that despite the current circumstances the businesses will continue to employ their staff in the best interests of all concerned. Where that is not possible, they should consult their financial and legal advisers or Government agencies.

Other organisations may include statutory and quasi bodies such as the Australian Tax Office, Office of State Revenue, Workers Compensation Insurers etc. These organisations should be made aware of any issues the business is facing, or may face in the future and where possible arrange interest free payment arrangements or other assistance to assist in managing the organisations’ cash flow.

Landlords – These key stakeholders which include, retail, commercial and industrial and infrastructure landlords will likely face large numbers of tenants requesting assistance in order to survive. Where possible, in the interests of providing a lifeline, temporary arrangements should be facilitated to assist. Some retail landlords are already offering 3 months rent free periods. Landlords will of course need to approach the same stakeholders that their tenants have to deal with, whether they are financiers, suppliers of services and goods or staff in order to manage the current crisis they are facing.

Directors of listed and large Corporate companies who find themselves in difficult financial circumstances as a result of the Corona Virus may avail themselves in greater numbers of the Safe Harbour protection in accordance with the Corporations Act. The safe harbour provisions, which commenced in 2017, will protect directors from personal liability for debts incurred by an insolvent company if, after a director ‘starts to suspect’ that the company may become or is insolvent, the director starts developing a course of action that is ‘reasonably likely to lead to a better outcome’ for the company than the immediate appointment of an administrator or liquidator. In order for the safe harbour to apply, the debt incurred by the company needs to be ‘directly or indirectly’ in connection with that course of action taken by the director. Part of the business plan may well include some of the strategies addressed above.

Individual stakeholders and business owners such as Specialists, GP’s, Dentists, Physio-therapists, Optometrists and others who need to engage with patients face to face have to address more difficult issues. Besides from taking the necessary health precautions, they cannot manage their businesses remotely and if they are required to close for any of the Corona virus issues, they will have to manage their practices in the same way as any other businesses but for the fact they cannot operate remotely and will face cash flow pressure for the relevant period until the virus is eliminated.

What is certain is that we are all in this together and as long as we take measured steps along the way, we will all hopefully be able to get through these challenging days, weeks and months. If expert advice is required take it earlier rather than later.

If you or any of your clients or stakeholders have any questions or concerns in relation to the above, please call Trevor at CRS Advisory on 0412138130 to have a no charge discussion.

 

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What are your duties as a director?

It is important to know your duties as a director to ensure compliance in general and specific legislations. Directors who breach these duties may be subjected to civil and criminal penalties.

General directors’ duties:

General duties are imposed by the Corporations Act on directors and officers of the company which includes:

  • The duty to exercise your powers and duties with the care and diligence
  • Acting in good faith and in the best interest of the company
  • To not improperly use your position to gain an unfair advantage for yourself or for someone else,
  • To not improperly use information obtained through your position to gain an unfair advantage for yourself or for someone else, or to cause detriment to the company.

Duty to not trade while insolvent (Corporations Act Section 588G Insolvent Trading):

In addition to general director’s duties, you also have a duty to prevent the company from trading if it is insolvent. A director may incur civil and criminal liability for debts incurred during trading if there are reasonable grounds to suspect that the company is, or may become, insolvent. Hence it is important to be constantly aware of your company’s financial position.

Duty to keep books and records (Section 286):

Your company needs to maintain correct and adequate financial records to explain its financial position and performance. A director may become personally liable if they fail to take reasonable steps to ensure the company meets this requirement under the Corporations Act. In the situation of actions against the director for insolvent trading, the company will generally be presumed to have been insolvent during the period in which it has failed to keep adequate final records.

If you believe your company is in financial trouble or concerned about your duties as a director, you need to consult with an insolvency specialist. At CRS Insolvency Services, our consultants are all highly trained in corporate insolvency assignments. We will provide professional advice to help you make the best decision for your company while avoiding personal liabilities. Contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice now.

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Top 4 Bankruptcy Myths

It can be a tough time deciding whether or not to file for bankruptcy. You may be worried about the possible serious negative consequences of bankruptcy. Some of the common advice from friends and family, or information found on the internet might actually be incorrect. To ensure you are equipped with the correct information to help you make the right choice, we have debunked the top 4 common bankruptcy myths below:

 

  1. You cannot run a business whilst bankrupt

This is false. Although you cannot be a company director for a period of time that usually lasts for three years, you can still run a business as sole trader, employ staff and generate income. There will be certain restrictions placed on the business including that the business must be in your own name and that if you apply for credit over $5,882 you must disclose you are bankrupt.

 

  1. You will lose everything in bankruptcy

This is false. You are likely to lose property and significant assets to help you pay off your debts. However, most people will be entitled to most of their assets such as:

  • Normal household items;
  • Reasonable amount of cash to cover living expenses;
  • Motor vehicles to the value of $8,000
  • Superannuation, unless irregular contributions were made before bankruptcy.

 

  1. You cannot travel while bankrupt

This is false. Some people believe they will be banned from travelling or automatically blacklisted when they declare bankruptcy. However reality is that a bankruptcy trustee will generally allow you to travel overseas as long you are complying with your duties to provide information and make required payments. Prior to travel you will be required to gain written approval from your bankruptcy trustee and disclosure certain information about your travel.

 

  1. If you cannot pay off your debts you will go bankrupt

This is false. Whilst bankruptcy may ultimately be the best option, especially for those with limited assets and an earning below the income threshold. There are also various options available if you want to avoid bankruptcy, such as:

  • Informal arrangements with your creditors
  • Entering a debt agreement
  • Personal insolvency agreement

 

For more information, we offer a FREE initial consultation so that you can get unbiased, expert advice on how a bankruptcy can be best for you. Call the CRS Insolvency Services hotline at 1800 210 073.

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What is the difference between insolvency and bankruptcy?

Often people use the terms “insolvency” and “bankruptcy” interchangeably when they are in fact different. If you are potentially facing financial problems and looking for solutions, it is important to know the difference between the two.

 

Insolvency is when you are unable to pay your debts when they fall due. It is used as a blanket term to cover all types of debt problems. Comparatively, bankruptcy is one of the legal processes available to solve insolvency. It is important to note these differences as you can be insolvent without being bankrupt, yet insolvency can lead to bankruptcy.

 

Insolvency:

Insolvency is a state of economic distress where you are no longer able to meet your debt repayment obligations when they fall due for payment. This usually happens when an entity’s cash inflows are less than its outflows. For individuals, an indicator of this could be not being able to pay off an electricity bill or meet minimum credit card payments when they are due.

 

Bankruptcy:

Bankruptcy is the legal declaration of one’s inability to pay off their debts. This solution is appropriate where you can no longer pay off your debts or when you have more liabilities than assets (owe more than you own). You can either declare bankruptcy yourself or by one of your creditors who may apply to a Bankruptcy Court to declare you insolvent. Whilst bankruptcy will release you of your debts it may have serious consequences for your financial future and credit file.

 

If you are facing these financial issues or want more information on insolvency and bankruptcy contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice.

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Retail closures show plight of bricks and mortar stores in Australia

The closure of many well known retailers shows the plight of bricks and mortar stores in Australia.

 

The collapse of many household names, including Pumpkin Patch, Marcs, and David Lawrence highlights the plight of Australian retailers, who are struggling to compete with the rise of e-commerce websites.

 

The convenience and instant gratification of online shopping revolutionised the retail industry. However, this is only the beginning. With global giants such as Amazon entering the Australian market, there are grave concerns about how local retailers can sustain themselves against such large scale competition.

 

The plight of bricks and mortar stores is exemplified through the demands of the industry, particularly fast fashion. Instant gratification plays a huge role in consumers constantly searching for the next best thing. With the bombardment of Instagram trends and what certain influencers are wearing, the climate has shifted to benefit retailers who can meet these demands.

 

Subsequently, traditional bricks and mortar operations are left to shrivel as they fail to adapt to changing customer desires.

 

If you would like more information on company liquidations, or are considering one yourself, then please contact CRS Insolvency Services. Our consultants are all highly trained in corporate insolvency assignments. We will provide professional advice to help you make the best decision for your company while avoiding personal liabilities. Contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice now.

 

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What assets can I keep during bankruptcy?

Here at CRS Insolvency Services, we understand that the bankruptcy process can be very confusing and daunting for many people. As such, we’ve broken down the key points to know and answer the question ‘What assets can I keep during bankruptcy?’

 

Firstly, if your assets include tools used to perform a trade, you can keep them as long as they are no more than the saleable value of $3,750.

 

Secondly, if you own a vehicle or vehicles for transport, you are also allowed to keep them, provided that they are no more than the saleable value of $7,900. However, if you owe finance on the vehicle then this will vary. In this scenario, the $7,900 threshold will be determined by the vehicle’s value less the secured debt.

 

Thirdly, here is a non-exhaustive list of other possessions that you are allowed to keep in bankruptcy:

  • Household goods, such as appliances, furniture and clothing
  • Personal injury claims and compensation
  • Life insurance policies

 

These statutory thresholds are maintained by AFSA, and these values are correct at the date of publication.

 

For more information, we offer a FREE initial consultation so that you can get unbiased, expert advice on how a bankruptcy can be best for you. Call the CRS Insolvency Services hotline at 1800 210 073.

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How do you file for bankruptcy in Australia?

Here at CRS Insolvency Services, we understand that the process of filing for bankruptcy can seem difficult and daunting. However, our personal insolvency advisors have helped simplify the process for you.

 

Here’s what’s required to file for bankruptcy in Australia:

 

Choosing a Bankruptcy Trustee

There are two options when appointing a bankruptcy trustee.

The first option is to appoint the Official Trustee from the Australian Financial Security Authority (AFSA). If you lodge your application directly with AFSA, the Official Trustee will automatically become your Bankruptcy Trustee.

 

Otherwise, for your second option, you can choose to appoint a Registered Trustee in private practice. A registered Trustee must be registered by AFSA to accept appointments under the Bankruptcy Act. If you choose this option, you must lodge your application with the Registered Trustee as they will need to sign and attach a Consent to Act with your application.

 

Completing the Bankruptcy Forms

You will need to complete the following forms before AFSA will accept your application:

  • Debtor’s Petition; and
  • Statement of Affairs

 

AFSA may also request certain supporting documentation to support the information provided in your Statement of Affairs.

 

Here at CRS Insolvency Services, Anthony Warner is our in-house Bankruptcy Trustee if you choose to appoint a Registered Trustee. If you want bankruptcy advice that you can trust call CRS Insolvency Services on 1800 210 073 today.

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