CORPORATE ADVISORY DIVISION What to do when the sharks are circling Tony Hood B,Ec, C.A M.B.A

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?

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

What can we do? Recognise the signs; early diagnosis provides opportunity for remedial action. Timely, meaningful financial information including B/S, P&L 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

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

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