CORPORATE ADVISORY DIVISION

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CORPORATE ADVISORYDIVISION

• Tony Hood B,Ec, C.A M.B.A

• What to do when the sharks are circling

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Key Issues

• Issues of Insolvent trading for Members
  Committees (Incorporated Associations) or
  Directors (Limited by Guarantee). Same burden as
  Directors of BHP
• Consequences debts incurred may become personal,
  significant personal duress
• Who determines solvency, or the business capacity
  to meet debts as and when they fall due?

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Solvency

• While solvency is a question of fact, directors
  are ultimately responsible to assess solvency and
  take appropriate action.
• Auditors report may include
• an emphasis of matter alerting members of a
  possible going concern problem
• Qualified report
• Either outcome may result in difficulty for the
  Statement of Members committee or Directors
  Declaration to be signed

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• What can we do?
• Recognise the signs early diagnosis provides
  opportunity for remedial action.
• Timely, meaningful financial information
  including B/S, PL and Statement of cash
  Flow/Sources and Application of funds.
• Use of Fund statement to understand cash drivers
  of business
• Monitoring of key working capital rations. E.g. .
  Liquidity ratio
• Monitoring of creditor days and stock levels
• Monitor and report on statutory obligations

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• Understand and forecast the impact of new
  investments both on profitability and cash flow.
• Ensure the business expertise of operators in all
  specialty areas food service, liquor, gaming,
  member services and entertainment.
• Government compliance
• Customer base loyalty, visitation rates, duration
  and spend

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Proactive strategies

• Communicate with financiers/ avoid penalty rates.
  Network, honestly communicate.
• Manage exit points liquidation costs
• Time provides options so early identification
  important
• Use of part time and casual staff and report on
  wage management per supervisor
• Management of cash flow can actually add to
  profitability. JIT stock reduces ST debt and
  interest
• Merge/surplus asset sales
• Use experts to ensure reality of situation/fresh
  eyes