No business run correctly wants to be faced with the prospect of going into bankruptcy, regardless of industry. In a worst case scenario, the business will simply be shut down and all that was worked for liquidated to the highest bidder.
Ideally, the best way to stay out of bankruptcy is to put a significant emphasis on revenue generation as well as cash flow. Simply landing sales is not enough; the business needs to make sure its monthly cash flow is coming in to offset the liabilities and payments going out. In this respect, the use of a property lawyer for debt recovery can be very handy, especially where clients or customers have outstanding accounts receivable balances owed.
The above said, where bankruptcy seems like an inevitability there are still options available under Australian law, including informal and formal agreements.
The informal arrangement is exactly what it sounds like, a contract between the business borrower and its commercial lenders to make a loan modification. This could include a temporary delay of payments due with interest added or an extension of the pay period to reduce the amount of the periodic payment per month. The informal agreement is a cooperative approach that has no legal binding. If one or both of the parties decide to go back to original terms, there's nothing the other party can do about the change to stop it.
The formal agreement involves an actual, legal change to the existing loan involved. It is a formal alternative provided for via Australia's Bankruptcy Act of 1966 and creates a binding change to the parties involved. Further, the formal agreement involves a debt agreement administrator make sure the formal agreement is followed by all involved. There are two types, Part IX and Part X, in terms of formal agreements. Only the Part IX debt agreement works for a business as the Part X version is intended for personal insolvency cases only. Fortunately, the Part X agreement is has a very low cost to implement, which makes it a viable option for businesses in trouble.
All the above said, a troubled business has to accept the fact that any kind of viable alternative to bankruptcy will require some kind of significant compromise. Any business assuming it can just demand an alternative agreement from a lender to avoid bankruptcy is simply going into related discussions with the wrong mentality. A business has to do their research and seek legal counsel if needed to become informed about the ins and outs of pursuing this type of venture.
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John Greyson is one of the most knowledgeable guys in town, he knows everything you need to learn about the legal business. Stay tuned for more of his cool tips and advices about the best Redchip debt recovery services at http://www.redchip.com.au/services/debt-recovery/ .
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