“You can call them zombies or just call them companies that have survived only as a result of all the support and depreciation. If they are brought to justice, they will most likely refuse. “
KPMG Partner Restructuring Services Morgan Kelly has worked in several major administrations and liquidations, including in the hospitality, finance and mining services. Credit:Daniel Munoz
Morgan Kelly, a partner at KPMG that specializes in restructuring services, warned that these unviable “zombie” groups risk infecting healthy companies if allowed to continue.
“Every time we talk about a company in trouble, it’s not a separate issue. It affects everyone who has a relationship with this company. ”
“When companies collapse, they destroy other companies along with them. This is why the concept of a zombie company is important, because the longer these companies operate, the longer the contractors continue to provide services or provide them with goods, and suppliers will not receive money for it. So there is an effect of infection. ”
“It’s important to note that sometimes zombie companies don’t know they’re zombies, and no one else knows either.”
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Kelly is particularly concerned about rising costs for businesses, including higher labor costs and rising costs of goods and services caused by the tight supply chain.
“While these commodity prices continue to rise, in some areas revenues are being held back due to inability to meet.
“If you can’t supply, you can’t sell, you can’t service, you can’t do what your business does, and your income is limited.
“At the same time, you also get less profit because the cost of everything you need to put,
including labor costs, has grown ”.
Workers at the Probuild site in Melbourne gathered things before leaving after learning of the group’s collapse. Credit:Wayne Taylor
Shepard, who was the chief administrator of the Grocon group of companies, which collapsed in late 2019, says the construction industry is of greatest concern at the moment.
“Building definitely gives us more opportunities on a formal and informal basis. It’s at all levels, from large construction companies, to developers dealing with stressed builders, and to construction companies dealing with subcontractors who are in trouble. ”
Shepard says the first groups to experience stress will be subcontractors for moms and dads, that is, those small businesses that service or provide the construction industry that run the family and don’t have the financial means to cover losses.
“Many of these businesses will have fixed-price contracts or similar arrangements that do not allow them to tolerate rapid cost increases. It may be possible to incur some costs, but many of these costs are now much higher than what they can pass on or absorb. ”
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“So if you have construction contracts before COVID and you’re still working on it. You’re probably working for nothing. “
ATA has historically been one of the most frequent creditors in the event of a business collapse. He confirmed that he has increased his collection activities over the past two months.
“We understand that many people – especially small businesses – have done this harshly through COVID and may now have tax debt,” said ATO Deputy Commissioner Vivek Chaudhary.
“Our message – don’t bury your head in the sand – even if you can’t pay the entire amount owed at once, contact us or your registered tax professional to discuss and we will work with you to set up the appropriate payment procedure. We can’t help taxpayers who don’t cooperate with us. “
Chaudhary said that where taxpayers are not involved in the ATO, the agency is taking tougher action.
“Our debt collection activities give priority to those taxpayers who pose higher risks and refuse to participate. That is why our initial focus will be on taxpayers with more debt before including taxpayers with all other debts. ”
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https://www.watoday.com.au/business/the-economy/contagion-experts-warn-zombie-businesses-will-drive-collapses-20220518-p5amdw.html?ref=rss&utm_medium=rss&utm_source=rss_feed
