We recently were involved in a small business that needed to close down, the staff found out about financial issues when the Director received a wind up notice. The business owner had been dealing with significant financial issues for a number of years and had been constantly struggling to keep the business afloat.

Staff were rightly concerned over their employment, their entitlements and their superannuation. The owner had told them everything would be covered when he first spoke with them, that the business would be okay and that he would trade out of it.

By the time we determined that the only course of action was to shut the business, unfortunately the staff had been convinced that the doors were staying open. The mistake was that an analysis was not taken before this was communicated and the result when they were told of the closure was aggression and vitriol towards the owner.

It is important to ensure that staff are not given false hope of the future of the business, in our situation the owner needed to also go bankrupt personally and had no hope of paying staff entitlements. Even if we had undertaken a Deed of Company Arrangement approach we would be unable to rely upon the support of staff as the trust had been broken by the attempts to allay their concerns through impractical outcomes.

We recommend that you get advice before talking to staff about the future prospects of the business, the worse thing that you can do is give them an outcome which is impractical or impossible.