Our client’s problem
We were recently referred a property developer client who had two companies which were involved in a failed property development in northern New South Wales. The companies had limited assets and they owed several hundred thousand dollars to creditors.
The main options available for our client were to:
- Place the companies in voluntary liquidation or wait for a creditor to make an application to Court to place them in liquidation; or
- Make offers to unrelated creditors to seek to settle debts with a view to the companies not being placed in liquidation.
Our client did not want to place the companies in liquidation as he believed it would have affected banking facilities held by other companies, which the two failed companies had guaranteed. So, he chose to engage us to help negotiate settlement arrangements with creditors.
Assistance with chosen course of action
After discussions with our client, he decided that he was prepared to apply the limited funds held by the companies, along with a small amount of further funds which he would contribute directly towards the debts owed to unrelated creditors.
We then wrote to unrelated creditors and advised them of:
- A brief background information regarding the companies.
- The companies’ financial position, including providing details of the companies’ assets and creditors.
- That we considered that it was highly unlikely that there would be any material return to creditors in liquidation, given the companies’ poor financial position and what we estimated would be the Liquidators’ costs.
- An offer on behalf of our client to settle unrelated creditors’ debts on the basis that funds held by the companies were distributed equally to creditors, along with a small amount of further funds which our client would contribute directly towards the debts owed.
All creditors accepted the offers made and creditors each received a return of just under 26 cents in the dollar in respect of their debts. Whilst debts were not paid in full, this actually represented a much better return to creditors than liquidation, where they would have been paid virtually nothing. It was also a great result for our client as it meant the two companies avoided liquidation and the risks involved.
Contact us for assistance
If you are struggling with debts we can help. This may include helping with settling debts which you or your business owe to creditors. So, don’t delay things any further and get in touch with us on 1300 906 966 or send us an email at firstname.lastname@example.org to arrange a free confidential initial discussion.