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The biggest thing for me, personally, was dealing with the emotional stress and the need for good, no nonsense direct advice. Our strategic approach therefore includes understanding the clients individual requirements and business health before recommending a particular solution. We don't have generic fixes. Every strategy is tailored to achieve the best outcomes. It's worth knowing that when a client's in distress, the default option is often to call an insolvency practitioner, but insolvency practitioners have a legal duty to act for creditors, not the business owner. And generally, an insolvency practitioner has got less options as they don’t always offer refinance or one to one negotiation services. That's where they're different.
Hank de Jonge
Executive Director of de Jonge Read
At de Jonge Read, we work for the directors, focusing on protecting their interests and the future. And the best part, there's nothing to lose by speaking with us to explore the right path for your client. We sit down with clients, have a look at their situation, determine what options are available to them, which sometimes isn't insolvency, it might be a refinance, it might be a negotiation with creditors. There are all sorts of different options. We'll sit down and review these, and then once we've worked out the best way forward for that client, we put that advice in writing, and present it to the client - we don't charge for that service offering. I guess the peace of mind for the client and the referrer, for that matter, is that the client can get some really, really good advice from a holistic point of view as to the different options that are available, and have it in writing with a firm costing on what it would cost to implement that.
In summary, I guess my own experience with insolvency made me realise how important it is for clients to feel supported emotionally, not just technically. That's why I built de Jonge Read, to provide a combination of technical expertise and empathetic support, which is something I wish I had when I was going through it myself.
A number of reasons. One of the biggest issues is whether the business can genuinely afford the payment plan, and as accountants will know, the interest charged on these ATO payment plans will no longer be tax deductible come July 25, which makes the true cost of the payment plan even higher. While payment plans might seem like an easy first step, they're not always the best long-term solution, and that's why it's important to step back and look at all the available options, like small business restructuring, a pre-pack, or even voluntary administration. Every business situation is different, and we focus on identifying the most strategic, cost-effective path forward, not just the most obvious one.
When we meet with a client we're looking at all of these options, and we're working out which option is best suited for that client. Certainly, if they can afford a payment plan, and that's well within their means, then that's certainly something that can be done. However, it’s more when the situation is that there is an insurmountable debt, that the payment plan might be just ‘kicking the can down the road’ that this might not be the best option. This is especially relevant when a client believes that entering a payment plan will bring finality to a Non-lockdown Directors Penalty notice. This is not true. A directors penalty notice will lockdown and the debt will move to the director personally even though the payment plan commences. If the business ultimately fails, the director will now be personally liable.
We approach each case with precision, meticulously assessing risk compliance to ensure every option we recommend is the right fit for the client.
We work closely with accountants because they play a critical role in these strategies. Accountants are invaluable for providing us with up-to-date financial information, cash flow insights and a clear picture on the client's balance sheet that's essential for us to assess the viability of different options. Our role is to take that financial data and apply it strategically. We look at the legal, commercial and practical sides of restructuring and then design and implement a solution that aligns with the client's specific situation. While we're not accountants ourselves, we see them as trusted partners in the process, ensuring that every strategy we propose is grounded in solid financial understanding. We need insolvency practitioners, we need finance brokers, we need accountants, we need lawyers. We bring all of these people in to complete a successful strategy.
At de Jonge Read, we like small business restructures (SBRs), and we've been involved in lots of SBRs and getting those across the line, but we don't recommend them unless the numbers stack up. Our strategic approach ensures SBRs are a tool, not a shortcut, only recommended and proposed with a clear review and long-term planning.
Currently we are seeing clients coming to see us who have gone into SBRs recommended through other advisors and are now saying “we can't afford it”. I think what’s happened with SBRs is that they were definitely the ‘flavour’ of the month. I think when the SBR started, the ATO were quite relaxed and what's happened over the last 18 months or two years, is that they have certainly become more stringent and closely monitored, which is good, especially in terms of cash flow. There are lots of good things with SBRs, but they're not the answer for every situation. That's why we focus on tailored solutions, from pre-packs to DOCAs to strategic refinancing, each crafted to meet the unique needs of our client.
There are many different options, one of them would be a sale to a related entity. The government did come out during COVID and gave some pretty clear guidelines there that a sale to a related entity, “a pre-pack”, can be legal as long as it's transacted for commercial value. Now that means it'll need a goodwill valuation, it'll need a plant and equipment valuation, it'll need a sale contract, and the related party will need to pay the commercial value of the asset. So, I just can't reiterate enough. It's got to be for commercial value, and as long as it's for commercial value, and this can be demonstrated, then that's quite a legal transaction. Staff entitlements, if they're transferred across, which generally is the case, can be offset against that purchase price. So that's one option that might be available. But sometimes we get clients who just simply want to go home, or they're looking at the business and the business isn't sustainable, so going into a small business restructure or any type of insolvency could kick the can down the road. In these cases, maybe it needs to be what we call a controlled exit of the business, basically selling the business to a third party or shutting it down in a controlled manner to get the best result for creditors, get the best result for stakeholders and so on.
The best thing is to basically try to get these clients to get their head out of the sand and have a look at the different options. We're happy to meet with any clients, look at their options, identify the best way forward based on that client's particular circumstances and put all that in writing. Even if the client doesn't go ahead, at least they've got a plan B. At least they've got another option that they can potentially look at, if necessary. We tend to find that once we've met with that client, given them written advice and given them information, quite often, they'll look at coming on board. It's not just about looking at options. It's about crafting a strategic plan that works in practice, not just on paper. That's the difference we bring to the table. When clients come to you in distress, reach out to us and experience the impact of our tailored approach. Our five-star rating reflects the trust and success we deliver. And I guarantee, once you've worked with us, we're confident that you'll make us your first call every time a client needs help navigating financial hardship.
Hank de Jonge shares his insolvency expertise and how he helps businesses get the help and crucial advice they need.
Hank de Jonge
Executive Director of de Jonge Read
