Why Geedup entered liquidation after the ATO forced a wind-up order
Anaita breaks down how Geedup owed $2.2 million to the ATO and $16.5 million to other creditors, and explains why the ATO rejected a debt restructure offer in favor of forcing liquidation to recover more money. She warns founders to be careful with debt, especially with the ATO.
The lessons
Bad debt can kill your business, distinguish it clearly from good debt.
You can sometimes negotiate unsecured creditor debts down through a business restructure, but the ATO won't always accept it.
Never let ATO debt go unmanaged, they can force liquidation if they believe it recovers more money than a settlement.
Questions people ask
Can a company recover after entering liquidation?
Yes, a company can recover from liquidation if it can recoup enough money to pay off its debts. In Geedup's case, they owed $2.2 million to the ATO and $16.5 million to other creditors after the ATO secured a wind-up order.
Why did the ATO force liquidation instead of accepting a debt settlement?
Geedup offered to pay 18.76 cents on the dollar for their ATO debt through a business restructure, but the ATO believed liquidation could recover around 25 cents on the dollar instead. Because the extra recovery was worth more to them, the ATO pushed for the wind-up order.
Transcript
It's another sad day in e-com today because G'dup has officially entered liquidation after the ATO has secured a wind-up order. And what that sounds like is the ATO has issued G'dup a stat dec, which basically tells them, hey, if you don't pay back the money that you owe us within 21 days, we're going to shut down your business. Getting a stat dec is very scary and very serious matter. And what I can see is they owed $2.
2 million to the tax office. Remember, I think they were about a $20 million company at one point. So $2. 2 million to the tax office and then $16.
5 million to other creditors. As someone who is doing a lot of research on this sort of stuff, I want to explain this. And it says that GDAP told the federal court that there was an offer to pay 18. 76 cents on the dollar for their ATO debt.
Sometimes when you're in a really bad place, you can actually go through a business restructure and negotiate your debts down with unsecured creditors. So that could be like your Shopify loans and the ATO. You can negotiate paying cents on the dollar. It's like they had offer to pay 18.
76 cents, but ATO is saying, well, no, if we wind up your company and you go into liquidation, we can most likely get 25 cents on the dollar. So I guess the unfortunate thing is that because the ATO thinks that it can get an extra 7 cents on the dollar for the debt that they are owed, they have forced this liquidation with Jita. I looked up, can a company recover from liquidation? And the answer is again, yes, it can recover if it can recoup enough money to pay off its debts.
There is a big learning for business owners, and that is be careful with your debts. Of course, there is good debt and bad debt, but the bad debts can absolutely kill you. And my last lesson of all of this is don't screw with the ATO.
