Last month Golden Century, a much-loved Cantonese restaurant in Sydney's Chinatown, went into voluntary administration. But just this week there were reports it had been "saved" thanks to a $2.4 million rescue plan. Needless to say it's been a rollercoaster ride for the dining public.
So what does it all mean for the future of Golden Century? What, exactly, is a business "rescue plan"? And why have we been hearing so much about this million-dollar wine vault? We asked the experts – Desmond Teng from Chifley Advisory, who co-authored the creditors report, and insolvency lawyer Thomas Russell, partner at law firm Piper Alderman – to help explain your most common questions.
What’s the episode recap?
In August, the owners of the restaurant cited a dispute with their landlord as the reason for calling in the administrators.
Diners and chefs took to social media to farewell the three-storey restaurant and its signature XO pipis, with many lamenting the end of an era after a stellar 32-year run by co-founders Eric and Linda Wong.
On Instagram in August, the restaurant appeared to confirm it was unable to renegotiate its lease, and was preparing to vacate its Sussex Street location.
"We have been deeply touched by the outpour of love, support, and a little surprised by the tremendous reaction to the news that as we approach the end of our 20 year lease at our Chinatown venue," reads the social media post. "It is with deep sadness we will have to vacate our beloved premises we have come to know so well since 1990."
What’s this “rescue plan” I’ve been reading about?
In their report to creditors, administrators Gavin Moss and Desmond Teng of Chifley Advisory outlined a deed of company agreement (DOCA) – that is, a fund created to pay out creditors, predominantly employees, owed money by the restaurant.
The DOCA – the so-called "rescue plan" – amounts to about $2.4 million, cobbled together from $489,011.85 cash in the bank, $750,000 from the part-repayment of a loan from Keenward (a separate company owned by the Wong family), and $1.2 million from the sale of Golden Century's handsome wine collection.
At an online meeting this week, 47 out of 49 creditors who attended – mostly employees of Golden Century – voted in favour of the DOCA to pay outstanding superannuation payments and leave entitlements. Two abstained from voting.
In voluntary administration schemes, a near-unanimous "yes" by creditors is highly unusual. Creditors are often inclined to vote against the DOCA because of bad faith towards the director, or because the payout isn't as favourable as they would like.
"I've not seen anything like this in my 14 years' experience," says Teng. "To me the message I get from employees is two-fold. One, the management and owner must have treated them well in the past [...] And two, they would like to see the business come back in the future."
Was Golden Century trading while insolvent, as some media stories have suggested?
No. One news outlet highlighted Golden Century's losses in recent years, but this doesn't mean the restaurant was trading while insolvent. In fact, restaurants can run at a loss for sound business reasons, like choosing to invest profits in refurbishments or renovations.
In the 2019 financial year, Golden Century reported a loss of $1.1 million – the same year it unveiled a new third floor kitted out with private dining rooms, a purpose-built kitchen, and Vintec temperature-controlled fridges for their premium wine collection.
"If you've traded at a loss but have enough of a buffer because you've made profits in previous years, or you're able to fund the business from a loan or other sources, there's nothing sinister about one or two years of losses," says Thomas Russell, insolvency lawyer at law firm Piper Alderman. "It's part of an ordinary business cycle."
Teng agrees, saying the question of a restaurant's solvency rests on a number of financial tests, the most important being its cash flow. His report states the following, in bold: "[Golden Century] had sufficient working capital to meet its current liabilities and was solvent. Our preliminary enquiries revealed that the Company never traded whilst insolvent."
So the $2.4-million question: Has Golden Century been saved?
Yes. And no. As reported by Gourmet Traveller in August, voluntary administration is a legitimate and legal process for Golden Century to earn some "breathing space".
But the report is unusual because, when weighing the pros and cons of the DOCA being approved by creditors, it doesn't explicitly state Golden Century can reopen.
"Ordinarily in that section of the report it'll say: one advantage of the deed is it keeps the business going. And none of that is said here," says Russell. "It says [the DOCA] will give the company breathing space and maximise the prospect of the business continuing. But that's as far as the administrators have been prepared to go."
When contacted by Gourmet Traveller, Billy Wong, restaurant manager and son of Eric and Linda Wong, was unable to comment.
What happens next?
Well, we wait. The next few weeks will see the DOCA swing into action, collect funds, and distribute them to creditors according to their entitlements.
But perhaps a clue lies in Golden Century's wine sale. The report says Eric Wong, listed as the sole director of the company under the name Kam Wah Wong, has identified and procured the mysterious buyer of the grape-juice cache, rather than putting the bottles up for auction, or letting the administrators deal with the sale.
"One wonders if the director has incorporated the new company, and the new company is the purchaser of the wine, and soon the new company will own all the things this company formerly owned, and it will use them to open up the restaurant and carry on business. That would be my best guess as to what's happening," says Russell, while stressing there's "nothing objectionable" about this process. "That's exactly what business rescue is."
In an Instagram post today, the restaurant hinted at a comeback. "We have taken the first of many steps to ensure we can continue the legacy of Golden Century, but there is still much more to do," reads the social media post. "The Sussex Street premises have been returned to the landlord at the end of our lease, and we will continue to explore what opportunities lie ahead."
In the meantime, Golden Century may well be appreciating its breathing space, but a Sydney dining public is holding its breath.
This story was updated at 12.13pm, Friday 17 September, 2021.