In Show 084- Surviving Insolvency with Hank de Jonge originally broadcast on Facebook Live on Wednesday 25 April 2018 we explore this interesting topic.
You can download the work book here: 084 – Worksheet
Show Notes
Insolvency and winding-up has been the focus of this month’s episodes. Today we’ve invited an expert on insolvency to share his decades of experience with us. Hank de Jonge is the co-founder of de Jonge Read a business consultancy focused on guiding business through insolvency. Hank has an extensive background both operating and buying businesses. He founded de Jonge Read in 2006 and has strived to help companies to navigate the complicated world of bankruptcy.
Hank had been buying and selling small businesses for most of his career. He was a running a successful business but everything changed in 2001 after September 11th. Tourism dropped dramatically in Australia and that put his company into insolvency. He found it difficult to find someone that could give him straightforward advice. Insolvency experts usually work for the creditors not the debtors. Once he emerged on the other side of that stressful experience he decided to found a firm that would help others avoid the difficulties he encountered.
Every insolvency situation is different but Hank says there are some similarities. About 75% of his clients do end up going through a formal insolvency process. But in the last five years banks have become much more amenable to proposals to avoid that. Some businesses have encountered a one off event like a flood or an embezzlement. Those businesses are still in good shape they just need help over the hump. Other businesses, however, are no longer profitable and need more dramatic intervention.
Hank has seen it all when it comes to insolvency. Companies can make many different mistakes that leads to bankruptcy and winding-up. Poor management is one of the main reasons for companies faltering. However, one-off events can also put a company in dire straights almost overnight. When companies don’t react quickly enough to a problem it can lead to disaster. The sooner a firm like Hank’s becomes involved the better.
Hank often represents companies that are facing an insurmountable debt. They may owe money to the tax man or to their creditors. So long as the business is still viable there may be an opportunity to restructure the business to keep it from sliding into insolvency. But that’s not always the case. Hank once had a client who moved opened a fruit market and was losing close to $10 thousand per month. In that case the only viable option was to wind-up the business.
One of the newer changes in Australian law around insolvency is the concept of safe harbour. If you continue to trade while your business is insolvent you could become personally liable for any of the debts the business incurs. Recently, Hank represented the owner of cafe on the Gold Coast. The businesses debts were secured with the owner’s personal home. If she would have gone into liquidation she might have lost her home. By using safe harbour she was able to trade for another five months by showing that she was going to be able to turn around the business. That would allow her to sell the business rather than becoming insolvent. The safe harbour strategy allowed her to show to creditors that her continued business would benefit them in the end. Her loss in the end was reduced by nearly $180 thousand. Hank is quite passionate about safe harbour and thinks it’s a hugely useful tool for struggling businesses.
Disruption is a constant in business and that’s true in the pre-insolvency world too. Hank feels the industry has been tarnished recently by some bad operators. Hank is very keen that his industry becomes better regulated.
What book are you currently reading?
What book should every business owner read?
Richard Branson’s autobiography Finding My Virginity is a particularly good read.
What advice would you give to your younger self?
Don’t stick your head in the sand. Deal with things head on.
Contact Hank
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
In Show 083 – 5 Consequences of Winding Up a Company, we explore the interesting topic of winding up a business/company and the consequences this process may have.
Today we’re talking about the five consequences of winding up a business. Once a business has been declared insolvent a liquidator will be appointed to sell-off the assets of the business. There are a number of consequences of having appointed a liquidator. Today, we’ll discuss five of those consequences.
1. You lose control
The first consequence is the most obvious but one that you have to understand before you go down this path. Once a liquidator is appointed you lose all control over the company and its assets.
2. The directors are directors in name only
The directors may still hold that title but they too lose all control. Once the liquidator takes over the directors can no longer exert any influence on the direction of the company.
3. All of the assets will be sold to pay debts
If the company needs to have a liquidator appointed it’s because the business is insolvent and can’t pay back creditors. A liquidator’s primary responsibility is to pay back as much of that debt as possible.
4. The directors may still owe for personal guarantees
If a director or someone else at the company has personally guaranteed any of the debts incurred by the business that money still has to be paid back. The bankruptcy of a company won’t wipe out the debt that was personally guaranteed.
Government regulations may stop you from practicing your profession
If you’re company has gone bankrupt in certain trades like the building industry you are banned from being able to operate in that industry for three years. Different industries have different rules so you need to know what those rules are before you declare bankruptcy.
Are you considering winding up your company?
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
In Show 082 – Find Your Why With Peter Docker originally broadcast on Facebook Live on Wednesday 18 April 2018 we explore this interesting topic.
You can download the Worksheet for today’s episode here: 082 – Worksheet
Show Notes
Today on BLL we’re excited to welcome Peter Docker onto the program. Peter is a speaker, teacher and author of the book Find Your Why: A practical guide for discovering purpose for you and your team. Peter says he exists to help people find the real purpose in their working lives so they can do extraordinary things. Peter says your why is not created, it’s discovered. That’s what makes it authentic and real.
Discovering your own why is an act of leadership, Peter says. You have to be vulnerable and dig deep inside to help you discover your purpose. Once a leader establishes their why they need to turn to a group why. What is it that makes your organization different or unique? What’s the higher purpose? Being able to put that purpose into a single sentence makes it actionable. It will affect every part of the business. It will help you to hire people who believe what you believe and to actually stand for something.
Peter served for 25 years in the Royal Air Force. He drew on that experience when developing his concept of a nested why. As the commanding officer of a squadron stationed overseas. The Air Force is nested inside the larger armed forces which consists of the Army, Navy and Air Force. The Air Force is then made up of individual squadrons. Each is different in character. This can be applied to business as well. A large company can have an overarching why but each division can have a slightly different why. That allows each part of the organization to better express it’s personality.
A why is just a tool. You have to use it to build something. Having a why without using it is pointless. Your why should infuse every part of the business. Everything you say and everything you do either adds or subtracts from your why. It will either add or take away from the trust your organization engenders.
When Peter first entered the Air Force he couldn’t fly. The Air Force then spent the next 12 months of basic officer training to figure out if Peter would be a good fit. Contrast that with business. Companies hire people based on their experience and skills and then hope that they will fit in. If you speak your why out loud you will attract people that will be a good fit. Your why will bring people together with common beliefs.
Change is the new normal in business but Peter believes a companies why can be a constant. Rolls Royce’s why is to attempt to create a perfect automobile. Despite being a century old their why never changes. That can be the same for your business too. Your why will be different but it will be your North Star.
Simon Sinek’s Ted Talk can be found here: Youtube
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
In Show 081- Why You Should Avoid Bankruptcy originally broadcast on Facebook Live on Monday 16 April 2018 we explore this interesting topic.
Show Notes
Today on Fast Fix Monday we continue our discussion about bankruptcy. There are a number of consequences when you declare bankruptcy. Those include:
- A trustee will be appointed to manage all of your financial affairs. You will have to give up all the information related to your debts and other financial information.
- Bankruptcy will affect your income and your employment. You will have a set amount of money you will be allowed to earn for yourself. That amount depends on how many dependents to have. Everything else will go to the trustee.
- Bankruptcy doesn’t let you avoid all your debts. It will allow you to wipe out much of your debt but things like fines and child maintenance cannot be eliminated.
- Bankruptcy can affect your ability to travel overseas. You may have to hand in your passport. You will need consent from our trustee who may not let you go.
- If you’re bankrupt your name will forever appear in the National Personal Insolvency Index. People will be able to search that index and find that you’ve gone bankrupt in the past.
- Bankruptcy will affect you ability to obtain credit in the future. Credit reporting agencies will keep a record of your bankruptcy for five years from the date you declared.
- The trustee may sell your assets. Your allowed to keep your household goods and a vehicle as well as the tools of your trade. But everything else can be sold to pay your debts.
- You may lose the right to continue legal action. If you are in the midst of a lawsuit and the trustee will decide if that case will continue.
- Bankruptcy lasts for three years. You will have to declare all your financial assets and liabilities. You have to provide all that information before the bankruptcy comes into effect.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
In Show 080 – What to know about Insolvency with Lee Crosthwaite originally broadcast on Facebook Live on Wednesday 11 April 2018 we explore this interesting topic.
You can download a copy of the worksheet for this episode here – 080 – Worksheet
Show Notes
Insolvency is a dirty word for anyone in business. But there is always a risk that you will have to wind-up your business because of a lack of funds. Today, were joined by Lee Crosthwaite a partner at Worrells Solvency and Forensic Accountants. He’s a registered liquidator and has worked at the firm since 2002. He has been involved in administering a number of high profile bankruptcies in Australia. He has a lot of great insights into what an insolvency practitioner does. We also discuss how business owners can turn their business around and avoid insolvency.
Lee says working in the industry can be difficult as he has to deal with people during one of the most difficult times in their lives.
“You have to have a lot of compassion for the people involved.” He says.
There are several stages to the insolvency process. An individual may become insolvent and so to can a business. A company is in the early stages of facing insolvency is very different from a company that is heavily insolvent. You have to deal with those situations in different ways. Early on the focus is on trying to turn around the business, usually through the restructuring of debt. The other aspect of insolvency is when the company is on its last legs. A creditor may have wound up the company through the courts. At the at point Lee’s work is all about liquidating the company assets and paying employees and creditors.
There are a lot of misconceptions about the insolvency process. The most common is the idea that no one gets paid during a bankruptcy. That may be true at the very late stages of insolvency. But if a turn around process begins early enough that outcome can be avoided.
There are a lot of mistakes business owners can make that could lead to insolvency. The biggest is, of course, financial mismanagement. Not having proper budgets or up to date financial information is a very common error that Lee encounters. Not having up to date financial information means the owner may not know things are going wrong until it’s too late. Having enough capital on hand is also critical. Many people start a business without enough capital and are never able to catch up.
You have to have a good business plan if you’re going to succeed. Understanding your target market and you ability to head in the right direction is critical. There are excellent accounting programs available to ensure that your financial information is up to date. Making sure you’re balancing you cash flow against your expenses and creditors is also key. If you do start to struggle you need to deal with it immediately. Keep your bank, your employees and other creditors informed throughout the process. The earlier you start trying to the fix the problem the more options you will have.
If you get to the point in your business where you are starting to have trouble seek advice. Whether it’s a lawyer or an accountant do it. Don’t put your head in the sand. When you’re going into your business make sure you have an exit strategy.
What book are you reading right now?
“I’m reading Tim Cahill’s autobiography that my kids bought me for Christmas.”
What book should every business owner read?
“It’s James Kerr’s book Legacy which all about how the All Blacks principals can translate into business.”
If you could give advice to your younger self what would it be?
“Ensure that you enjoy yourself along the way.”
Connect with Lee
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
In Show 079 – 3 Ways to Avoid Insolvency originally broadcast on Facebook Live on Monday 9 April 2018 we explore this interesting topic.
Show Notes
Today on Fast Fix Monday we discuss the three ways to avoid insolvency. Throughout April we are going to be discussing Phase 13: Winding up you business. That process can be forced on you if you become insolvent. To make sure that never happens here’s what you need to do,
1. Cash is king
You need to improve your cash flow and there is a few different ways you can do that. First, you can invoice your customers on time and regularly. You’d be amazed how many people get focused on the work and forget to bill their clients. Next is chasing debts. If you have people that owe you money chase them down. Don’t let them avoid paying you any further. Finally avoid over trading. Don’t take orders for things you don’t have the resources for.
2. Never ignore your creditors
If you’ve ever had a customer ignore an invoice you know it can be incredibly annoying. Don’t do the same thing for you creditor. Communication is key. If you have suppliers or bankers you owe money to, keep talking. Don’t stick your head in the sand.
3. Reduce your overhead
In any business you are going to have overhead. Those can be reduced very quickly and can save you a lot of money. Staff costs are a huge part of that. You can reduce lease costs as well.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
In Show 077 – Phase 13 – Insolvency, Winding Up and Bankruptcy originally broadcast on Facebook Live on Wednesday 4 April 2018 we explore this interesting topic.
You can download the worksheet for today’s episode here – 077 Worksheet
Show Notes
On BLL today we discuss Phase 13: Insolvency, Winding Up and Bankruptcy in greater detail. We are going to focus on this phase throughout April of 2018. Terms like insolvency and bankruptcy have a well earned negative connotation but it doesn’t necessarily have to be that way. Winding up a business can be a positive thing. At some point you’re going to exit your business and you need to have a plan in place before that happens.
Winding Up
All companies need to be registered with ASIC in Australia. To end a business you need to deregister it with ASIC so long as the company is still solvent. All the shareholders have to agree to this process and a special resolution has to be approved by the company directors and shareholders. A notice than has to be listed in the local newspaper. A liquidator will be appointed to wind up all the companies outstanding debts. The liquidator will then deregister the company. You have to get good advice from your accountant, your lawyer and a liquidator to make sure all your bases are covered.
Involuntary Winding Up/Insolvency
As the name suggests this occurs when a company gets into some financial difficulty and is no longer able to make its debt obligations. The company is deemed insolvent and a winding up process begins. The company can be wound up by its members or, more likely, by its creditors. Documents have to be filed in the courts. No more transactions can be undertaken by the company after the creditor issues a statutory demand for payment. If you don’t respond within 21 days you are deemed insolvent. If the court agrees with the documents and the correct process has been followed a liquidator is then appointed. Any assets are then sold off in order to pay creditors.
Bankruptcy
This is similar to insolvency but this time it’s personal. You no longer have the ability to meet all your debts obligations and have to seek protection from your creditors by declaring bankruptcy. This is not something you do at a moments notice. You have to get good advice from an accountant and a lawyer. There are a number of ways that bankruptcy can occur. The first is what’s called a voluntary bankruptcy. After filling out the proper paperwork a bankruptcy trustee will be appointed. The process will take about three years to complete. Involuntary bankruptcy occurs after you’ve failed to respond to a bankruptcy notice within 21 days. A creditor then files a petition with the Federal Court. The court will then appoint a trustee. The debts have to total more than $5000 in order to start this process.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
In Show 076 – Replay – Fast Fix Monday – Problems Multiplied originally broadcast on Facebook Live on Monday 2 April 2018 we explore this interesting topic.
Show Notes
Today a special Easter edition of Fast Fix Monday. We are going to replay an episode from late last year that deals with the top seven problems you will encounter when growing your business.
Cash flow crunch
You really need to be careful about you cash flow when expanding your business. That includes both operating cash flow and financing cash flow. You have to be able to keep your business operating and you need to carefully plan where the money is going to come from.
Spending spree
As you begin to expand your business there is a temptation to go out and buy the biggest and best equipment and locations for that growth. That can lead to major problems when the financing dries up. Be extra careful with your money while growing the business.
Operational clumsiness
When you expand your business any problems you have in your business are going to be multiplied. When you open a new location you have to ensure that the new location communicates effectively with your other offices. If that gets neglected you are going to create additional problems.
Leadership
Any leadership faults that currently exist are going to be exacerbated by expansion. The leadership needs to be as effective as possible well before you plan on growing the business.
Customer service
This is a problem that businesses always run into as they grow. As you grow you have to bring in new people to help and that can alienate existing customers. You have to ensure that your customers are receiving a consistent level of service.
Management disconnect
Your time is going to be filled with the expansion of the business and that is going to leave a lot less time for your staff. You have to ensure that there is a good level of communication with your staff during the expansion or you are going to contend with worker alienation that will affect your productivity.
Human Resources
Whenever you expand the business you are going to have to bring in new people. Making sure you hire the right people is crucial. Proper staff selection and integration with your current employees is going to be a big component of your future success.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.
