Government pandemic support measures resulted in 2021 being a quiet year for insolvency and turnaround professionals. Those measures have ended, and we are now seeing a gradual uptick in corporate and personal insolvencies, particularly in the last few weeks as businesses and individuals surviving on government money start throwing in the towel.
We expect a significant jump in formal appointments once Treasury unshackles the ATO’s debt collection team who have been blatantly absent from the equity division market for more than 18 months. We are not expecting this to happen in earnest however until the Federal election is done and dusted.
There is also plenty of anecdotal evidence in the marketplace to suggest that the supply crunch is causing business across the spectrum plenty of problems and frustration. Lots of pent-up demand post lock down but a general lack of supply hampering sales and profits, by forcing up the price of inputs.
Resources we shared in 2021
In 2021 we have attempted to keep readers informed and up to date with newsletter, blogs and commentary on social media on the following topics.
Shady directors engaged in illegal phoenixing had been able to backdate their resignations and shift blame for their shady dealings onto other directors or ‘straw’ directors. They could also resign and leave a company without any directors, enabling assets to be shifted before ASIC noticed and wound up the company. Laws applied in February prevent directors from improperly backdating resignations or leaving a company without directors.
A ruling handed down in the Federal Court abolished the peak indebtedness rule. This rule has been used by liquidators to calculate amounts in unfair preference drawbacks. This now means that liquidators will need to do further investigation to calculate if a net preference payment occurred, in some cases resulting in longer investigations and greater liquidation costs.
Because of a difference in accounting method between a company and its administrators, both claimed input tax credits for the same acquisitions. The Administrative Appeals Tribunal found that the company and not administrators were entitled to the ITCs, even though the administrators had paid for the acquisitions during their appointment. This case serves as a reminder to pay attention to detail when GST is involved.
And a judgement of the Federal Court in March offered hints of the kind of evidence that could prove sole ownership of a family home by a wife and save it in bankruptcy if the creditors come knocking.
We answered some of people's most pressing concerns about debt and bankruptcy in our blog this year:
Small business survival or otherwise
We provided an overview of business recovery plans here.
But in the event a business doesn't recover from a financial downturn or catastrophe, we answered the question,
And director Paul Gidley described how insolvency processes are an essential part of a healthy economic ecosystem:
Paul's contribution to ASIC's disqualification of a 'dummy' director of 4 companies received a shoutout on LinkedIn by ASIC Senior Investigator, Brett Warren CA.
Presentations and a new YouTube channel
2021's simplified liquidation and restructuring regime for small business (Part 5.3B of the Corporations Act 2001) was a hot topic for fellow accounting and business advisory professionals throughout the year. Paul Gidley, director Jeff Shute and manager Luka Pilipovic were all kept busy making presentations on the topic.
Paul Gidley gave a presentation to his fellow professionals at the ARITA Expert Series – “Realisation of property post-bankruptcy-discharge” then joined fellow director Ben Ismay in a presentation on “Small business insolvency and issues for owners" at the Financial Counsellor's Association of NSW annual conference.
Luka Pilipovic expanded the Shaw Gidley YouTube library with videos explaining the intricacies of Director Penalty Notices; Bankruptcy, Employment and Income Contributions; ATO Credit Reporting and Requests for Security; and if company debts can become personal debts.
We hope that the information we have provided, in newsletters, videos and training events, has contributed to safer navigation through the pandemic business challenges for you and your clients.
Shaw Gidley are experts in restructuring, turnaround and insolvency and provide free initial advice on these matters. Please contact our offices on (02) 4908 4444 or (02) 6580 0400.