Written by Schon Condon in September, 2007
Time is certainly travelling quickly this year as we watch the economic and political machinations play out before us. One question people are certainly focused on at the moment is the likely result in November.
Personally I believe that the market will have a lot of effect on its own destiny and that the future after the election will be driven more by the holistic impact of many factors rather than one single decision. One fact though is that it will be some one that loses the election rather than necessarily being a decisive winner. We will wait and see.
Recently I was involved in a conversation where surprise was expressed by an individual regarding the speed with which failed business operators were able to re establish themselves.
Indicating my support for Turnaround it is appropriate that we create a process that enables the slate to be cleared and then all parties to be able to get back on their feet and move forward. This positive approach is critical. However there will always be those that test the system to its limits and those that will help them. In this trail much unpleasantly and carnage can be left.
This reminded me of a matter that I had dealt with some time ago in the building and construction industry, scaffolding to be precise.
The company had been wound up officially by one of it creditors, I believe it was the workers compensation insurer. When I arrived at the premises the director was already on the phone in mid flight with his accountant making the necessary arrangements for shelf companies and the like. Cutting a long story short the known assets of the company (at least those that we could find) were seized, debtors collected, investigations conducted and statutory reports made.
A report was circulated to creditors and the ensuing meeting called. At the meeting the creditors were (rightly so) livered with what had gone on and still wanted more answers. Success was achieved by focusing all present on the further investigation of issues involving the reestablishment of trading by merely linking them to the small issue of fee approval (please don’t laugh).
The meeting was closed and I set about the task of identifying how the business had successfully and so promptly recommenced operations. Once these investigations were complete the meeting was reconvened and the results announced.
The director had re-established his business with the following:-
• The assistance and advice of a notable solicitor and accountant,
• A new shelf company,
• The purchase back from the liquidator of assets from the now defunct entity of about $15,000 (well above the auction value)
• Approximately $30,000 of other equipment which had been secretly held away from the liquidator’s control. (It would actually be two successive liquidations later before these assets were brought to the surface), and
• In excess of $500,000 in funding.
Creditors took great umbrage to the last point expressing concern that people like this were able to obtain such funding. When I pointed out that the funding consisted entirely of trade credit and the majority of those present were on the list of providers, the issues of a competitive market, tough times, the need to seek every opportunity, etc were raised.
I do understand the market, but it is impossible to legislate against an activity where the players in the market will knowingly provide ongoing support. As I indicated above there were at least two more windings up, I had an involvement in the first and third. There were more after that apparently, each time much damage was done; the biggest impacts being felt by the ATO, insurers and the like.
As is becoming a popular topic of conversation – there is not only a responsibility to borrow responsibly but there is also a need to lend responsibly. If things go beyond a comfortable limit then action needs to be taken early to ensure that appropriate action can be taken. Cutting the rug out from underneath someone can potentially do more damage than an orderly and intelligent exit or even having lent the money in the first place, today’s grab could be tomorrows preference.
Enjoy the Read.