Transport

Background

• A family trucking business with five companies within the group. The business had significant turnover and a large workforce
• The business had numerous interstate runs with some vehicles owned outright and some leased
• Both the husband and wife were company directors

Issues

• Business had become increasingly run-down with no significant capital expenditure for some time
• The Business was operating without written contracts
• The Business had arrears of statutory liabilities of more than $2,000,000.  The debts had accrued over a number of years
• The Business had been insolvent for more than 12 months. It had repeatedly failed to follow the advice of its accountant
• The Business entered into various repayment plans with the ATO, the terms of which were not met
• Both Directors were served with Section 222AOE Director Penalty Notices (DPN) from the ATO which, in effect, made them personally liable for unremitted PAYG deductions, if the Business failed to pay (or commit to pay) the debt or appoint an Administrator / Liquidator within 14 days of the receipt of the DPN
• The directors did not follow the advice of their accountant and seek professional insolvency advice before the expiration of the 14 day period

Action

• Due to crippling cash flow problems, the directors finally appointed Voluntary Administrators 17days after the service of a DPN totaling $1,000,000
• The fleet was ultimately sold via various auctions and private sales in conjunction with the family members

Result

• The creditors of the companies received a dividend from the vehicle sales
• The directors achieved closure on the family business

Alternative

• If the directors had followed the advice of their accountant, a Voluntary Administrator would have been appointed within the 14 day period, thereby avoiding any personal liability
• The matter also serves as a reminder on the importance of updating directors’ addresses on the ASIC register, the address to which a DPN is sent
• Failure to keep the details up to date may result in the director becoming personally liable without knowing it

Background

• An Investigating Accountant’s report  lead to the appointment of a Voluntary Administrator
• Secured debts totaled $20 million
• The report identified :
  • Internal Fraud
  • Inability of the company to consummate potential sale agreements

Involvement

• Engaged to conduct investigating accountant’s report
  • Quick review of group financial position
  • Assessment of financial position and options discussed and evaluated
• Key issues for secured creditors
  • Business in precarious position
  • Business entirely reliant on funds from debtor financing facility to trade
  • Business losing money on a daily basis
  • Companies not liquid
  • Assets not effectively transferred from original company (GW  & GG Wilson) to new trading entity (Wilson’s Transport)
  • Wilson’s insolvent, GW arguably solvent but tied to operations of Wilson’s
  • Inadequate intellectual depth and capacity
  • Management issues and lack of succession plan

Options Available

• Facilitate sale of business to Scott’s Refrigerated Transport
• Close business and appoint VA
• Re-introduction of director
• Assist the director
• Continued monitoring of sale prospects

Action

• Company proceeded with professional assistance to consummate business sale

Result

• Sale of business allowed for payment of secured creditors in full but insufficient funds to pay out unsecured creditors
• Companies subsequently placed in Voluntary Administration leading to a Deed of Company Arrangement for each
• With strong recoveries and some planning and negotiations by the Deed Administrators:
  • Unsecured creditors of Wilson’s Transport received a dividend of $0.15
  • Unsecured creditors of GW & GG Wilson were fully paid, enabling shareholders  to also receive a return

Background

• A trucking business which operated in the Murray Bridge area since 1990
• The Company provided local and intra-state freight , on-forwarding and storage services
• One of only two Directors died two years prior to our appointment.  His death was a significant blow to the business as he was responsible for day-to-day management
• The remaining Director was forced to assume more strategic management responsibilities and hired his wife to handle the administration of the business

Issues

• Business had  very significant statutory liabilities
• The business had been insolvent up to 12 months prior to our appointment
• The Company’s accountant had warned of the Company’s insolvency
• The remaining Director had limited business administration skills
• The Company entered into various repayment plans with the ATO, the terms of which were not met
• Prior to our appointment, the Director began selling trucks with equity to generate cashflow

Action

• The business was insolvent and therefore it was appropriate to initiate a Creditors’ Voluntary Liquidation, however a resolution of 95% of shareholders was required.  This was not feasible as the deceased Director’s estate was still in probate
• Initiated a Voluntary Administration, which then lapsed into Creditors’ Voluntary Liquidation
• Sought to deal with transport and storage contracts and arrangements in place with the Company
• Sold the remaining assets
• Initiated a claim against the ATO to recover (as a preference) the significant payments made whilst the Company was insolvent
• The factored debtor book was collected

Result

• The Directors achieved closure of the business which they were struggling to trade profitably

Currently

• The employee entitlements were covered by the General Employee Entitlements & Redundancy Scheme, allowing employees to receive their entitlements
• Until investigations and recoveries are finalised, it will be too early to determine if a dividend can be paid to any class of creditor