18 December, 2020
FOR IMMEDIATE RELEASE
BUSINESS LIFELINE TO END NYE – BUSINESSES SHOULD SEEK PROFESSIONAL HELP ASAP
-Insolvency Advisor urges businesses to address insolvency issues this year before Safe Harbour moratorium ends, to avoid trading insolvent on or after 1 January 2021 -
Leading Corporate Insolvency advisory MacKay Goodwin has warned struggling businesses have just days to seek professional help before The Federal Government's temporary safe harbour ends on New Year's Eve. Directors of companies trading whilst insolvent will no longer have protection from 1 January 2021, which could leave them open for involuntary liquidation proceedings.
During the pandemic, the Corporations Act suspended provisions that would otherwise hold directors personally liable for trading while insolvent.
"It is critical to get the message out that from New Years’ Day, company directors could face penalties if their business is found to continue trading while insolvent," says Mackay Goodwin CEO Domenic Calabretta.
"Originally the Safe Harbour provisions were due to end in September but were extended when it became clear the economic effects of the pandemic weren't going to be rectified sufficiently by then.”
Under the current economic conditions, it is up to directors to get their accounts and records in order before the deadline passes. If companies have been trading insolvent during 2020, they are strongly encouraged to seek professional financial help. Companies in serious trouble should have a professional financial adviser, specialising in restructures or insolvency, appointed ahead of the 31 December 2020 deadline.
Says Calabretta: "Safe harbour laws state that an external administrator must be appointed to your company before the moratorium's expiry on 31 December 2020, if the debts incurred during COVID are to be excluded from a liquidator's claim for insolvent trading."
He continues: "I really encourage companies to take the time now to examine their businesses and identify if it is still viable, or suffering from temporary liquidity challenges. Those companies could undertake a restructure, which could see them continuing to trade, but in a stronger financial position. With the right advice, they may come out of COVID stronger than they went in."
"Where a company is placed into formal insolvency, directors will need professional advice on compliance with regulatory obligations, such as the provision of books and information and assistance to a liquidator, administrator or controller," he says.
Mackay Goodwin also strongly encourages companies to undertake a general health check to ensure they have viable plans for recovery and subsequent growth.
"Directors may need advice on lending, cash flow, restructuring, forensics, and improving efficiencies to avoid financial trouble. A professional adviser is best placed to help," says Calabretta. "Sound planning is best achieved through a collaborative process between you and an advisory expert."
"While I recognise the holiday season is a terrible time of year to factor in major business health checks, I can't stress enough how important it is for struggling businesses to get on top of it before the moratorium ends. From 2021, Directors can be liable if they have not sought help or taken appropriate action to mitigate claims, and the last thing we want is for the new year to be as miserable as 2020.”
About Mackay Goodwin: Founded by CEO Domenic Calabretta, Mackay Goodwin is one of Australia’s leading insolvency and restructure businesses and has carved a niche successfully working with stakeholders in distressed businesses. The company handles everything from complex restructures and recoveries for listed companies and on behalf of various financial institutions to advising SMEs and finding the most appropriate business solution that works for all parties.
Mackay Goodwin is offering several free advisory activities for businesses who find themselves in trouble. Aside from free webinars, it has also released a downloadable business survival pack. It is also providing an initial free consultation with businesses, and to assist the business community its staff have committed to providing two hours of their day free of charge to affected businesses for the next six months.