The year 2020 just ended, and people can’t help being grateful for it. Needless to say, the New Year has rekindled hope in the people. The global pandemic brought in new sets of lockdown restrictions that affected people and business worldwide. Compared to the rest of the world, Australia’s economic recovery was on the rise. The June quarter saw a decline of 7 per cent in Gross Domestic Products (GDP) which was identified by the statistics bureau as the largest plunge since 1959. It affected the overall annual growth of the economy, which fell by 3 per cent.
While larger pictures show that economic growth was the highest by the end of the year, individual businesses may say otherwise. The March-April 2020 report of ‘Impact of Covid-19 on Business’ report concluded from a survey that the virus adversely affected businesses. The statistics recorded a fall in cash flow and demands for goods by almost 66 per cent. Nearly 1/3rd of companies in the country laid-off workers because of the new conditions and switched their business practices. Domestic businesses relying on China for trade and travel were the most affected because Australian companies rely mostly on commerce.
Some individual businesses in the private sector were unable to recover from the economic crises during the pandemic. Insolvency issues and Company Voluntary Arrangement (CVA) to liquidate the firm are contingency plans for financial distress. Companies which are already short on cash might immediately try to hire a liquidator to seek solutions. However, it is crucial to keep in mind that anybody but experienced insolvency practitioners could do more harm than good. Australia took a more progressive stand in recognising this practice to the point where the bankruptcy judge directed insolvent businesses to consult these experts. The Insolvency Law Reform Act of 2016 sought to regulate insolvency practices and improve the profession’s legitimacy.
Even with all this, businesses still tend to make mistakes in choosing the right professionals to help them recover from insolvency. In any case, hiring authorised experts is pivotal, and it is required to research the market before the final call. Here are some tips for choosing from numerous insolvency practitioners:
Many companies tend to hire a local liquidator to cut down costs, and the multitudes of websites also might seem attractive. But it is vital to make sure that they are registered to practice. Some key documents to look for would be the Australian Securities and Investment Commission (ASIC) and the Australian Restructuring Insolvency and Turnaround Associations (ARITA) certifications.
- Individual requirement
The company’s situation, the nature of the business, their contingency plan, and the current market climate are factors that require analysis. It will help the company choose a particular insolvency practitioner who will cater to their demands while keeping in mind the business’s unique nature.
The licensed practise itself requires some experience. Further research of the cases handled by the potential insolvency practitioners will inform one about their reputation.
- Transparent Management and Privacy of the Client
Communications and dealings between the shareholders and the company must be regulated openly by the insolvency administration. Transparency in transactions can be ascertained by checking how the firm disseminates information about their work. And also check if they are conscious of not disclosing client details.
The pandemic has been unkind to businesses, and many have had to pay the price. Letting the ship sink as a group plays the violin may not always be the best strategy. Good insolvency practitioners have recovered firms on the brink of wind-up. Even as the company seeming to be going out of business, it is crucial to invest in a liquidator who can cut losses and financial distress.