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Today, stress, anxiety, and depression can be related to financial uncertainty. By restructuring both your business and personal assets, it could relieve a lot of this financial stress giving you the opportunity to live a happy and stress-free lifestyle.

 

With Inflation, interest rates and cost of living constantly increasing, and the ATO. 

charging interest and penalties for late payments, issuing record levels of Garnishee and Directors penalty notices, and reporting the Company’s debt to credit reference agencies, the challenge of small businesses is to protect their business and personal assets by avoiding bankruptcy and liquidation.

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HOW CAN FORENSIC ACCOUNTING HELP YOU

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Section 588G of the Corporation Act prohibits companies from trading insolvent and provides a course of action for liquidators against company directors, or anyone involved in the affairs of a company, such as disqualification from managing companies including criminal or civil penalties.

In addition, it can call back payments made to creditors within 6 months of the debtor being considered insolvent.

 

Many Accountants acting on behalf of small businesses are primarily involved to ensure that businesses comply with the regulatory requirements, laws, standards, and ethical practices, and neglect to advise on essential management principles including:

• The implementation of proven management principles, 

• The business structure for asset protection and tax minimization 

• The importance of a business plan

• The preparation of a projected cash budget that can be compared with actual performance quarterly and introduce strategies to correct major discrepancies. 

• The break-even-point of the business 

• The selection of Key Performance Indicators (KPI) 

• The design of the chart of accounts of the accounting system to provide meaningful financial information to the Directors. 

• The implementation of a cost-effective marketing plan including, social media, website, and customer relationships. 

• The cost of products and services 

• On-going training program to increase efficiency and productivity

• Refinancing to reduce fixed costs. 

• All loans to directors and shareholders should be evidenced by a loan agreement and secured by a General Security Agreement (formerly known as a fixed and floating debenture charge) that grants a lender an interest in all present and after-acquired property (All-PAAP) and must be registered with Personal Property Security Register (PPSR).

• Credit provided to customers should be secured by a General Security Agreement (formerly known as a fixed and floating debenture charge) that grants a lender an interest in all present and after-acquired property (All-PAAP) that is registered with Personal Property Security Register (PPSR).

• Obtain the Director's guarantees to secure all goods and services provided.

• Insert a standard clause in all invoices a retention of title clause providing that ownership of the goods is retained by the seller until full payment is made.

• Ensure an ongoing optimum organization culture.

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OVERCOMING BANKRUPTCY AND LIQUIDATION

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​Being Forensic Accountants, our objective is to fully investigate all aspects of the business including associated entities and family members involved in the business to obtain a detailed understanding of its “AS IS” operations.

 

On completion of our investigation, we will provide a comprehensive report that will include comments and recommendations on all applicable management principles listed above including a review of the previous year’s financial statements and tax returns. 

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SMALL BUSINESS RESTRUCURING 

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The small business restructuring scheme that was introduced by Josh Frydenberg on 1st July 2021.

In collaboration with small business restructuring specialists, Forensic Accounting Group can offer several options including restructuring your business debts by preparing an application to reduce your company’s debts including GST and PAYG liability by 75% to 80%.

​This new scheme is available to small businesses who: -

• Operate as a company. 

• Has less than $1m of unsecured liabilities including GST and PAYG but excluding secured creditors.  

• Payment of all employee entitlements excluding leave and other entitlements that are not currently due to be paid.

• Payment of outstanding superannuation entitlements 

• Resolved that the Company is insolvent or likely to be insolvent at some future time.

• Appoint a small business restructuring practitioner within 3 months from your declaration on the published notices website and notify ASIC within 5 business that you have made a declaration. 

• The success of the proposal will depend upon unsecured creditors receiving a greater return as opposed to the appointment of an Administrator or Liquidator 

• The company stays in control and continues to undertake transactions that are in the ordinary course of business. 

• Creditors have up to 15 days to vote or reject the plan. 

• The restructuring practitioner oversees the voting process 

• Creditors can seek to vary the terms and conditions of the plan.

• 50% or more of the creditors by value can accept the plan. 

• Related members of Directors and Shareholders are not allowed to vote.

•  All secured creditors have priority over unsecured creditors.

• All unsecured creditors are paid equally in accordance with the terms and conditions as outlined in the plan. 

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HOW WILL FORENSIC ACCOUNTING ASSIST THE SMALL BUSINESS RESTRUCTURING PROPOSAL?

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This will include:

• Assist with the appointment of the business restructuring practitioner, 

• Assist with the development of a debt restructuring plan and a restructuring proposal statement which is put to the creditors for a vote by:

               (a) obtaining the list of all unsecured creditors, 

               (b) reconciling Directors' and Shareholders' loan accounts, 

               (c) prepare and lodge all outstanding tax returns and Business Activity Statement

               (d) review your business structure for the purpose of asset protection and tax minimization.

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HOW CAN THIS HELP SMALL BUSINESSESS?

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The main benefit to small business is as follows: -

• Unsecured creditors cannot begin or continue or enforce claims. 

• Owners cannot recover lease property from the time a small business practitioner is appointed.

• Secured creditors cannot enforce their security interest in the company assets in some instances.

• A creditor holding a personal guarantee from the company’s director, or their relatives cannot act under the personal guarantee without the court’s consent.

• The ATO cannot report their debt to credit agencies.

• Prevents Directors from being sued for insolvent trading.  

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PERSONAL INSOLVENCY AGREEMENT

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Personal Insolvency Agreements

Personal Insolvency Agreement enables individuals with financial difficulties to propose a formal agreement with their creditors to satisfy their debts without becoming bankrupt. 

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Creditors Agreement

The agreement normally provides an offer to pay all or a percentage of monies owed to creditors over time. The agreement also contains a moratorium on the creditor’s claims throughout the term of the agreement.

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Implementation

A debtor appoints a controlling trustee, (a solicitor or a registered trustee in bankruptcy) and provides them with:

1. An authority under Section 188 gives the controlling trustee control over their assets and requires them to call a creditor meeting within 25 days of his appointment.

2. A statement of affairs detailing all assets, liabilities, and other personal information.

3. A draft personal insolvency agreement detailing the terms of the proposal to be made to creditors.

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Acceptance

A special resolution passed by a majority in number and more than 75% in value of creditors attending and voting at the meeting. 

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Advantages

1. Avoids being declared bankrupt.

2. Releasing you from your debts.

3. Provided it is agreed upon, paying a % of the total amount owed to creditors.

4. Eliminates the constant harassment from creditors.

5. Making affordable payments over time.

6. Retaining your passport.

7. Property not included in the personal insolvency agreement is not available to creditors.

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Disadvantages

1. The debtor cannot act as a director whilst subject to the terms of a personal insolvency agreement.

2. The personal insolvency agreement will be noted by credit agencies.

3. If the personal insolvency agreement is breached or not accepted, creditors may apply to the court to have the debtor made bankrupt.

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CALL 1300 049 045 or EMAIL us confidentially at AC@FORENSICACCOUNTINGGROUP.COM.AU