With the new rules coming into operation in early 2021, it is opportune to work out if the debtor in possession structure will be appropriate for your business. The debtor in possession rules will allow a business to continue to trade, and for the owners to continue to operate the business without the limitations of the appointment of an insolvency practitioner, during the period that the business is putting forward a proposal to its creditors.
The advantages of this approach is that for a business in trouble, this will give it a small amount time to negotiate with creditors and potentially avoid insolvency.
The debtor in possession is substantially more advantageous than liquidation or administration as the costs are substantially lower, and it is estimated that the returns to creditors will be substantially higher. For a business needing to restructure its operations the opportunity that arises from the new rules are substantial as it may be the difference between continuing or needing to shut the doors.
Craig Dangar notes that “for businesses wondering what the next twelve months will bring, this offers a circuit breaker, a chance to assess your business, but more importantly a re-start where the trading conditions during 2020 may have tested the financial capacity of the business to continue”. Craig continued “whilst the rules are still unknown, businesses should be comfortable to start their planning process now, as some hard decisions will need to be made now and into early 2021”.
We understand that the decision to seek professional advice around restructure can be a tough one to make, but taking early steps gives you a lot more options than would be available if you wait until its too late. Reaching out to the team now and getting guidance on debtor in possession and how it can assist you business for the future is the first step to long term viability.
The team at C&D Restructure can assist in not only understanding the process but can devise an approach to creditors that is commercial, practical and achievable, with the team on the ground in Geelong, Melbourne, Brisbane, Sydney and the Gold Coast, we are well place to understand your business and how debtor in possession can help. Since March 2020, we have moved our primary office to Mt Gravatt from Yeronga, in Brisbane we retain visiting offices in Mt Gravatt and the City.