02 Dec 2013

Bags to Riches, to Liquidation


3 min

A simple concept for a shopping bag invented by a housewife on the Gold Coast resulted in a turnover of over $15 million dollars in just five years. Its downfall however, extended across the globe and culminated in a very unusual set of challenges in its liquidation.

The company’s meteoric growth and expansion into the Australian, US and European markets meant the business structure had to accommodate different laws and tax obligations; however a lack of experience, foresight and advice was not conducive to say the least.

At the time of our appointment:

  • The company’s trademark license was cancelled
  • Cash at bank totalled $140,000
  • Stock stored across the globe had been sold for $30,000 but not paid for
  • European debtors totalled $150,000
  • ATO debt totalled $496,000 – however tax returns had not been filed since 2009
  • The Chinese manufacturer of the bags was owed $521,000
  • Other trade creditors were owed $100,000
  • US entity had been sold for $450,000 less an estimate of what was owed to the US tax department.

The company employed 35 staff, 10 of whom were Berlin citizens. The Australian staff knew of the company’s precarious position and most had secured jobs with a new entity associated with the director. However the Berlin branch staff had no clue and on day one of our appointment they commenced their day with a Skype meeting conducted by an Australian liquidator advising them of their immediate unemployment. This was certainly unchartered territory and was just the beginning of the foreboding news to come.

As investigations into the German position unfurled it came to light that no German tax returns having been lodged. Our German lawyer advised that there may be some personal liability on the liquidator and criminal liability on the director’s part.

Needless to say I wasn’t about to make my first visit to Germany at this time!!

Debts were collected and an accountant was engaged to calculate the outstanding tax and negotiate a solution with the German Federal Taxation Office that complied with both Australian and German laws.

The last piece in the German story was in calculating the employee entitlements. It appears that the German labour laws are a little more generous than in Australia with $425,000 owed – which totalled more than the Australian employees claims, even though there were twice as many of them!

The pre-appointment sale of the stock and equipment was reviewed. The value of the stock and equipment in Australia, New Zealand and Germany came in at a whopping $440,000. We ran an expressions of interest program for the sale with the director, Chinese manufacturer and Berlin employees vying for the purchase.

Whilst the director purchased the stock and equipment, the last I heard the German employees had teamed up with the Chinese manufacturer and are now in competition with the director’s new entity.

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