Restructuring - Australian Retail & Hospitality Series: Part 3 - Restructuring early - How retailers and hospitality operators can avoid voluntary administration
Written By
Partner
Australia
I advise stakeholders in corporate restructures, special situations and turnarounds. Our clients typically have exposures to, or interests in, domestic or cross-border investments, transactions or special situations which may involve counterparties in, or at risk of, distress. I represent public or private companies and their boards, private equity or portfolio companies, investors, financiers or external administrators. My assignments are both contentious and non-contentious.
Senior Associate
Australia
I am a senior associate in the Restructuring and Insolvency practice in Sydney specialising in restructuring, turnaround and associated disputes.
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In Australia’s high-pressure consumer economy, formal insolvency can often feel like the inevitable endpoint for struggling retail and hospitality businesses. But it doesn’t have to be. With proactive restructuring and early action, business owners can often avoid the disruption and cost of voluntary administration (VA) altogether.
This final article in our three-part series focuses on pre-VA strategies — practical steps companies can take to restructure and stabilise before the formal appointment of administrators becomes necessary.
Why Early Restructuring Matters
Voluntary administration is designed to give companies breathing room while they assess their options. However, entering VA too late — after cashflow has dried up or stakeholders have lost faith — often leaves administrators with few choices other than asset sales or liquidation.
Early-stage restructuring can help businesses:
- Preserve brand and goodwill.
- Retain control (and board continuity).
- Avoid insolvency stigma that scares off customers, suppliers, and staff.
- Reduce professional fees and avoid court-imposed deadlines.
- Retain optionality — including raising new capital or exiting non-core assets.
Safe Harbour Early
The safe harbour provisions under the Corporations Act protect directors from insolvent trading liability if they are actively developing and implementing a restructuring plan with expert advice. To access this protection, a company must:
- Be paying employee entitlements and taxes as they fall due.
- Form a “better outcome” plan than immediate liquidation.
- Engage qualified advisers to assist and implement the plan successfully.
Cost Restructures
Lease costs and supplier terms are often the first areas to target. In a high-vacancy commercial market, tenants often have more leverage than they realise.
- Negotiate base rent reductions or turnover-based rent.
- Exit underperforming sites.
- Extend supplier payment terms.
Review Overheads and Store Network
Reviewing headcount, closing loss-making outlets, and centralising administration are essential. Consider rolling store-level P&Ls and reviewing wage-to-sales ratios monthly.
Digital Strategy and Channel Diversification
Some retailers and food operators have avoided VA by pivoting to E-commerce and D2C platforms, incorporating ghost kitchens or delivery-only models and, introducing loyalty programs and CRM-led repeat sales strategies.
Preserving Value
If liquidity is tight, businesses ought to actively consider selling non-core brands or store assets, bringing in minority investment or, refinancing secured debt or negotiating covenant waivers, where possible. In the end, with early action, many Australian retailers and hospitality businesses can restructure informally — avoiding the cost, stigma and disruption of VA but even if an external appointment is required, that does not necessarily mean it’s the end of the show.
