Novo IT went under after ATO rejected payment plan, owing thousands to Gartner, Ingram Micro

Novo IT has blamed its rapid expansion in 2013 and a reliance on Telstra for problems that led to its voluntary administration.

Robert Kell, managing director of the Wollongong-headquartered IT firm, has outlined the events that led up to the appointment of Deloitte Financial Advisory as voluntary administrators on 23 May.

During 2014-15, the company, which then traded as AVC, saw a rapid expansion that led to working capital constraints. The directors also recognised the need to reduce the MSP's reliability on Telstra.

In 2016, the company went through a restructure of the business and entered into a payment arrangement with the Australian Taxation Office (ATO) over tax debts.

When the ATO this year rejected a request to amend the payment scheme, the directors decided to place the company into voluntary administration to "undertake a formal restructure".

A report lodged with corporate regulator ASIC listed formal and informal proof of debts amounting to more than $800,000, including $50,000 to Gartner Australasia and $69,000 to Ingram Micro. However, only $350,000 was admitted through voting, including $118,000 debt to the Office of State Revenue and $222,000 to Brad Burden former director of operations for the company. The ATO's debt was not on this draft of the creditors' list.

The administrators expect Novo IT's directors to propose a deed of company arrangement (DOCA). This is an arrangement between the company and its creditors on how to deal with affairs, and typically includes a repayment plan.

The director's advisor said the DOCA would include provisions to protect employees' entitlements.

A Deloitte spokesperson told CRN earlier this month that the company's 30 staff were still being employed by the administrators.

Restructuring plan

When news emerged of the insolvency earlier this month, director Stephen Chapman told CRN that the board was taking the opportunity to restructure the business "to better align our business model with the needs of our clients and to attract new and rising talent".

He claimed that the company in administration, Novo IT Pty Ltd, was "one of our non-trading subsidiaries" and that the "principal trading entity, Novo IT Australia Pty Limited, a wholly owned subsidiary of the group, is unaffected". 

Novo IT Australia Pty Ltd was established by the three directors of Novo IT Pty Ltd on 21 April 2017, a month before the administrators were appointed.

AVC Pty Ltd was registered with ASIC in 2001 and was renamed Novo IT Pty Ltd on 16 March 2016.

According to Chapman, the decision to enter voluntary administration was necessary for the restructure to occur and followed the departure of one of the company's founding members.

"The group is putting forward a proposal to settle the claims of Novo IT Pty Limited with the administrators. Only a small number of suppliers have been impacted and no employees or clients will be affected," Chapman said.

As AVC, the company was a well-known channel player that partnered with the likes of AWS, Cisco, Dell, Microsoft and Telstra and had "focused on server and network infrastructure delivery for the last 28 years", according to its website.