TIDAL WAVE ON ITS WAY

Expert tips a ‘tsunami’ of state COVID insolvencies

THE fallout from the coronavirus crisis is expected to lead to a “tsunami” of insolvency appointments among Tasmanian businesses in the coming months and years, a leading Hobart expert has warned.

The dire prediction was issued by Shelley Brooks, the director of Rodgers Reidy Tasmania, a firm that specialises in corporate and personal insolvency and business turnaround strategies.

Ms Brooks said government COVID-19 financial support packages had eased the pain for businesses in the shortterm, but she predicted the deeper impact of the pandemic was yet to be fully felt.

“It is anticipated there will be a tsunami of insolvency appointments over the coming months and for up to two years following,’’ she said.

“The sad thing with this is if people were to actually seek assistance sooner rather than later, there could be the opportunity to restructure the business.

“As stressful as it is, there is no shame in asking for help.”

Farming and construction firms and not-for-profits are among 11 Tasmanian businesses reported to have gone into liquidation this year.

Tasmania has almost 40,000 businesses, with about 95 per cent of them considered small business operations.

Ms Brooks said as coronavirus restrictions were imposed — forcing many Tasmanian businesses to temporarily close their doors — there was a significant spike in enquiries made about financial viability and restructuring.

This reduced as support programs were introduced, but she said the payments did not take into account fixed overheads for businesses such as insurance, bills and loan repayments.

The federal government’s JobKeeper scheme, the state government’s Small Business Emergency grants and other measures such as rent relief have helped, but the programs are finite.

“For a lot of businesses that were already struggling, this really is the straw that broke the camel’s back,’’ Ms Brooks said. “Owners are torn as to whether they inject their personal funds into something that is a total unknown.”

Tasmanian Small Business Council chief executive Robert Mallett said the number of insolvencies in recent months appeared to be fewer than normal, but this would likely change once government stimulus programs scaled back.

“At the moment, it must give a lot of businesses false hope that they will be able to survive the future when the professional and independent view of the business could advise them otherwise,’’ he said.

“I think they should definitely be going to their accountant sooner rather than later and discussing what the future might look like and how they might weather it best.”

Independent member for Clark Madeleine Ogilvie said with a moratorium on bankruptcies until September and government support funding in place, there was currently a low level of liquidations in Tasmania.

“The challenge will come as businesses migrate from government support,’’ she said.

“It is essential that we get the transition right. We need a well-crafted pathway to a sustainable post-crisis business environment.

“Let’s also revisit the 2007 proposal to limit the period of bankruptcy to one year. We will need to ensure that those who through no fault of their own land in difficult circumstances are able to rebound.”

Ms Brooks said company directors had a responsibility to seek professional advice if they believe their company was, or may become, insolvent.

“I can’t emphasise enough for people to reach out and seek support; don’t put your head in the sand and wait until it’s too late,’’ she said.