What’s The Difference Between;
a Turnaround Practitioner and
a Company Liquidator?
And why Accountants, Bookkeepers & Lawyers need BOTH in their bag of tricks…
There is often confusion between the role of a Turnaround Practitioner and that of a Company Liquidator.
Both serve the distressed business market and provide a valuable service. However, to those not close to the insolvency industry, the two are often assumed to provide the same services & expertise.
This is certainly not the case.
In fact, the roles carried out by these service providers are distinct and separate.
Both serve an important part of assisting a financially distressed business.
Let’s examine the two roles in further detail.
The Role of a Liquidator
When a company can no longer continue to operate due to its financial position or some other critical factor (such as poor health of an owner or a major catastrophe) the company needs to be liquidated.
A company liquidation is the systematic process of realising (or selling) a company’s assets to pay out any outstanding liabilities the business may have – such as taxes, employee entitlements or unpaid bills to suppliers.
A liquidation is handled by a registered liquidator who will take control of the business for the purpose of winding down the company’s affairs.
In addition to selling any company’s assets that may remain, the liquidator will also collect the company’s books and records.
They will then conduct an investigation into the affairs of the business and a review of its historical trading performance in order to determine:
- The causes of the company’s failure;
- Whether the company was operated by its director(s) in accordance with the Law (ie Corporations Act 2001 and other relevant legislation); and
- Whether there is any evidence of additional assets that need to be realised.
There are a number of specific areas a liquidator will look at when conducting their investigations.
Critical areas of investigation include:
- Insolvent trading;
- Misappropriation of assets or company funds; and
- Voidable transactions such as preference payments or uncommercial transactions.
The liquidator will then communicate these findings with the company’s creditors, ASIC and the ATO.
If you are considering liquidating your business, it’s critical that you seek independent advice before you make any final decision.
The Role of a Turnaround Practitioner
In contrast, a Turnaround Practitioner is primarily focused on acting for the benefit of a company’s business owner(s) and or director(s).
A Turnaround Practitioner provides specialist turnaround expertise and solutions for company directors who need urgent business rescue or restructuring.
They can also provide for a smooth transition into and throughout a formal insolvency appointment in the event that it is required. Turnaround Practitioners work hand in hand with accountants, lawyers and bookkeepers. It makes sense; they are the people who best understand the company’s financial history.
So how exactly does a Turnaround Practitioner help?
Their aim is to maximise the outcomes sought by your clients by:
- Encourage fully informed decision making through detailed consideration of options and anticipated outcomes.
- Fully consider and advise on the personal financial impacts for the director in relation to either a CBE (Controlled Business Exit Strategy) or BRP (Business Rescue Plan) and any relevant formal insolvency options.
- Providing relief from aggravated creditors through effective negotiation or debt restructuring strategies.
- Provide professional execution and the necessary guidance throughout the process.
They will also ensure that you and your client are fully involved in every step of the process.
In some circumstances the damage is either too bad or recovery action has been left too late and the company cannot be restored to full health. If one of your clients is unlucky enough to find themselves in that position, a Turnaround Practitioner can also assist them with the transition into a formal insolvency appointment by:
- Referring you to the most appropriate insolvency practitioner taking into consideration the nature, size and complexity of your client’s business circumstances;
- Minimise the cost of the appointment by ensuring the appointment is conducted in the most efficient manner;
- Give realistic expectations about possible outcomes and major issues surrounding the appointment;
- Reduce stress levels by alleviating concerns through ongoing communication;
- Provide both you and your clients with detailed information concerning the relevant insolvency process to allow you to make informed decisions; and
- Turnaround Practitioners understand technical aspects of formal insolvency appointments such as insolvent trading, uncommercial transactions, preference payments, director breaches and personal liability issues. Consequently, they can confidently provide advice on how these issues may affect your client.
So where does that leave you?
Having investigated the difference between the roles, why then is it a good idea for an accountant, bookkeeper or lawyer to make sure that they have both resources available for clients in trouble?
In pursuit of outcomes that are in the business owner’s best interests, failing to consult with a Turnaround Practitioner in conjunction with or aside from discussions with a liquidator is only taking into account half the picture.
As an accountant, bookkeeper or lawyer, your clients’ circumstances won’t always fit neatly into one basket – i.e either the insolvency appointment or the turnaround basket.
For the best client outcomes align yourself with both.
Remember, a liquidator acts for creditors and is primarily concerned with dissolving the corporate structure. The moment a liquidator is appointed, directors lose all decision making powers.
Liquidators are unable to provide advice on dealing with assets or the impact of certain courses of action. They are bound by prohibitive independence requirements.
A Turnaround Practitioner is privately engaged by the director(s) and assists them in the discharge their duties; enabling an orderly wind down of business. Directors are able to retain control throughout the engagement period; working collaboratively with professional advisors.
While a Turnaround Practitioner cannot formally liquidate a corporate entity (this task must be carried out by a liquidator) it makes sense that a liquidator should only be contacted at the point where a formal appointment needs to take place.
Prior to that time, the best advice for your client will come from a Turnaround Practitioner.
If you have any clients currently experiencing financial distress, or would like any additional information regarding how the Turnaround Practitioners at ReGroup Solutions can be of benefit I would be more than happy to meet with you to discuss the matter further.
Consider contacting (or have your client contact) ReGroup Solutions for a 100% confidential discussion about the best way to deal with the problem.
We are prepared to provide a preliminary strategic analysis and recommendation report for your clients – at no cost.