Engineering a turnaround against the odds

After a period of rapid growth, a sudden industry slowdown and significant unpaid debts brought this QLD civil engineering company to the brink. Faced with plunging revenue, cash flow pressures, and personal tax liabilities, the directors turned to Jirsch Sutherland. Through Voluntary Administration and a strategic Deed of Company Arrangement (DOCA), the company preserved its operations, protected its team, and built a pathway to recovery and renewed success.

Background: Strong foundations meet unexpected challenges

The company was on a strong growth trajectory with revenue surpassing $2 million and plans to expand. However, an industry slowdown led to reduced project opportunities and a significant revenue decline by mid-2025. Alongside this downturn, the business faced several critical challenges that tested its resilience:

• Two major clients owed around $300,000 but were unable or unwilling to pay, causing severe cash flow pressure.
• To manage costs, staff redundancies were made, and directors voluntarily forewent their salaries, even injecting personal funds to keep the business afloat.
• Marketing and business development efforts began generating new contracts, but limited cash reserves and underestimated funding needs constrained sustainable growth.
• A Director Penalty Notice was issued following accounting errors, exposing the directors to personal tax liabilities.

Solution: Navigating the recovery with purpose and speed

Recognising the complexity of the challenges ahead, the directors engaged Jirsch Sutherland to explore restructuring options. Voluntary Administration was chosen as the path to stabilise the business while preserving value. This approach allowed the company to continue trading and maintain essential operations and staff engagement, while developing a Deed of Company Arrangement (DOCA). The directors (and their related Self-Managed Superannuation Funds) were the majority of the creditor pool and came with voting power to the creditor meetings.

Key actions included:

• Proposing a DOCA designed to be funded through future profits and recoveries outstanding debtors.
• Implementing the DOCA swiftly, with a creditors’ meeting convened within fifteen (15) business days to approve the arrangement.
• Obtaining the Deputy Commissioner of Taxation’s vote in favour of the DOCA;
• Structuring three (3) classes of creditors, providing a variety of return to all three (3) classes;
• Deep-dives into the related party claims to verify their ability to vote on the DOCA proposal, whilst getting their agreement to not participate in the DOCA Fund, for the benefit of arms-length creditors.
• Obtaining unanimous votes for the DOCA, from creditors and employees.
• Commencing the DOCA the day after voting to reduce uncertainty and risk.

“A trading Voluntary Administration always presents as a high-risk project, but I had faith in the company’s numbers and management, which is the key to a successful turnaround,” says Jirsch Sutherland Partner Chris Baskerville.

Results: stability restored and foundations for growth established

The combination of expert guidance and swift, decisive action led to a successful turnaround. The business was saved, with all employees retaining their jobs and receiving their accrued salary and leave entitlements, preserving morale and operational continuity.

“This outcome has laid a solid foundation for the company’s ongoing recovery and future growth,” adds Baskerville.