My business is in trouble. Should I appoint a liquidator?
Maybe. When a company director finds him or herself in an impossible financial position they are often given well-meaning advice from their accountant or financial advisor to appoint a liquidator this advice can unfortunately hurt them even further. Many people believe that because you are paying the liquidator they will look after your best interests and help you to get the business and you back on your feet. NOTHING IS FURTHER FROM THE TRUTH. A liquidators first priority in these circumstances is to themselves.
Remember that often as a director or a business owner you have signed personal guarantees for example if you have a shop or a factory and you have a lease agreement to run your business from this will have a personal guarantee with that. Creditors often require you to sign personal guarantees before they will supply you. In most cases overdrafts with the bank also come with personal guarantees. If you think you have personal guarantees remember liquidating the company will not remove those debts from you personally, you may need to consider bankruptcy, if you are not feel free to give us a call on 1300 879 867.
Liquidators are not on your side!
A liquidator’s responsibility is not to the business owner. It is to the creditors (people you owe money to) and to the courts. Their role is to recover as much money as possible from the liquidated company’s assets and to pay off the debts. That’s it. There is no obligation for a liquidator to consider your best interests. You do not even factor in the equation. Remember, liquidators are regulated they have rules to abide by, they are not going to risk that trying to save you a buck.
As soon as you sign the paperwork to appoint a liquidator you no longer have control over you own company, the directorship is instantly transferred to the liquidator. The liquidator will act in what they believe is in the best interests of your creditors and themselves. In most cases you have just signed and paid for your own business’s demise.
My accountant and I both knew that my business was in real trouble. After doing some numbers we realised the writing was on the wall and to continue trading would be impossible, without putting even more of my own money into it, so he advised me to call a liquidator to help resolve the situation and stop it getting worse. I was told that because I was paying for the liquidator and that this was a voluntary liquidation and not a creditor forced liquidation that I would be better off. Wow, was I wrong!
I met with the liquidators, they seemed nice professional people. They told me they would help me as much as they could to work through my financial problems. So I went ahead. Was I in for a shock. They seemed to understand my position, I had staff to consider and had customers lined up out the door waiting for service, there was plenty going on and to do. However, the minute I signed the paperwork the liquidator asked for the keys to the business premises and then absolutely everything was taken out of my control. I was physically locked out of my own business. I couldn’t even let my customers know what was happening. The next day my bank accounts were frozen. It was my worst nightmare. I lost everything!
How do I prepare when liquidating a company?
Get some advice. There are so many regulations and issues surrounding the wind up of a company its easy to get it wrong. One important tip PREPARATION. If you simply prepare yourself before you hand over the control to a liquidator most of the stress can be handled in a way that will work for you not against you. Although this sounds simple there is an enormous amount of regulation and rules in place in this process, always get some advice about this. If you are not sure what you should do and just need some advice simply give us a call on 1300 879 867. Bankruptcy Advice Pty Ltd specialises in pre-liquidation strategies.
What if someone else is winding me up?
No matter whether a liquidator is appointed by the courts or you appoint them voluntarily, there is a lot you need to know and do to protect yourself and your rights. Involve us. It is that simple. Generally you will receive a notice in the mail or a court order. If you have one of these give us a call on 1300 879 867. The longer you procrastinate the less options you have.
What steps do I need to take?
Preparation is the key. Be prepared and seek the right advice. Remember:
- Liquidators don’t work for you no matter how much you pay them
- Your creditors don’t work for you no matter how much of their bill you pay them
- Your friends love you but usually have no idea what they are recommending to you
Many people wrongly believe if you want to start again you need to get rid of the company through a liquidator. The assumption they make is that if you pay for a liquidator then they will work for you.
THIS IS NOT THE CASE! WE WORK FOR YOU – No one else. You are our client and we are only interested in getting the best possible result for you.
Can I continue to be self employed and run a business if I have been the director of a company that has been liquidated?
Yes! This is one of the most common questions and the answer is yes. There are laws that need to be adhered to of course, you will need to ensure you structure things the right way before attempting to move on. Liquidation does not need to be the end of your business life. We can help you through the liquidation process and help you rebuild a new life post liquidation. There are numerous options available, but often people are simply unaware of what they are. We take the time to explain the options available to you as well as helping you achieve your goals. Even if you need to go bankrupt you can still be self employed.
What do we do?
At Bankruptcy Advice Pty Ltd we help you work through your strategy. We then help you take the right action. Then we work toward getting the best possible outcome for you and protecting whatever we can. We communicate the right way with your creditors, and the liquidator if required.
What if I have a ATO debt?
The ATO has incredible power, beyond any other creditor, don’t mess with them or they can easily make you as the director personally liable for the tax debt. The ATO will often issue companies Wind Up Notices or Statutory Demands or even a Director’s Penalty Notice on you or your company. If this is the case you must act fast! Sometimes effective communication is all that’s needed, sometimes winding up the company is a possible solution and sometimes negotiation is required. No matter what is required we will help you work through a plan to get you where you need to be.
What If I have received a notice from the Tax Office?
If you have received one of these notices WARNING: DO NOT LET THEM EXPIRE. Call us as soon as you get one so we can help you work through your options. As soon as we have assessed the financial state of your business we will propose an action plan for you to consider. Remember we can help you no matter where you are in Adelaide, a computer and a phone is all you need and we will take care of the rest, simply call for a Free Consultation over the phone. Then the choice is yours whether you proceed or now. Call us for a free consultation today 1300 879 867. Remember we work to obtain the best and most favourable outcome for you – not the creditors.
ATO - Director's Penalty Notice
Directors Be Aware…
It is really important that every company director is aware of the recent changes introduced by the Australian Taxation Office and the extra legal obligations imposed on them and how they will impact you and your business. If you have a PAYG tax debt then you may be served with a Director Penalty Notice by the ATO.
What does it mean if I have a ATO Director's Penalty Notice?
The aim of a Director Penalty Notice is to make you the directors of your company liable for their company’s unpaid ATO tax debt. As a director, you will no longer be able to avoid personal liability for a PAYG tax debt, which comes with a Director Penalty Notice, if the following applies:
- Your debt is older than three months and or your debt was not reported to the ATO within three months of the lodgement date.
- As a director, you may also by liable for your company’s unpaid superannuation liability when you receive a penalty.
- Directors, and associates of directors, may now also be liable for a new personal income tax liability. This will make directors and their associates potentially liable for a company’s unpaid PAYG withholding liability.
Do I have any options if this happens?
Yes. If your business has a tax debt or you have received a Director Penalty Notice it is vital that you seek professional advice. We have various options you may wish to consider. Simply call us on 1300 879 867.
What if I ignore the notice?
There can be significant consequences for not complying with the ATO’s notice. This can include losing personal assets such as cars, property or shares and personal bankruptcy for the company’s debts.
What is a Statutory Demand?
A Statutory Demand is a demand made under 459E of the Corporations Act. This document is not issued by the courts. A Statutory Demand requires that the debtor company pay a specified amount of money within 21 days from the date of the delivery of the demand.
If the debt is disputed or there are irregularities in the document, the company should immediately seek independent legal advice and apply to the courts to set the demand aside on the basis that the debt, the subject of the Statutory Demand, is genuinely disputed. This application MUST be made within 21 days.
Will I be in trouble for Insolvent Trading?
Two critical things can determine is a company is trading insolvent. Firstly under Section 95(A) of the Corporations Act states that a company is solvent if it is able to pay its debts as and when they fall due. Accordingly the test as to whether or not a company is insolvent is that it is not able to pay its debts as and when they fall due. In other words, If you can’t pay your bills on time you can be deemed to be trading insolvent. Now if you have been in business more than 5 minutes you will realise that everyone that runs a business trades insolvent now and then. You don’t need to worry about that from a legal perspective, its just something creditors especially the ATO can use as a legal step to take you to court, so you will pay your bill.
Secondly, under Section 459C of the Act the company is presumed to be insolvent if a company has failed to comply with a Statutory Demand.
So if you get any sort of a legal notice in your mail box don’t ignore it, act!
Accordingly, the delivery to a Debtor Company and non-compliance with the Statutory Demand will provide “proof” which is sufficient for a creditor to apply to the Court for the appointment of a liquidator to the company. In plain english now, if you happen to get a Statutory Demand and don’t pay the amount owed on time, this can also mean you are trading insolvent.
Can the Statutory Demand just turn up in the post?
Yes, it can be delivered in person or simply turn up in the mail as registered post.
What is a Wind-Up Notice?
A wind-up notice normally follows a Statutory Demand. If a company is unable to pay its debts then the court has the power to wind it up and appoint a liquidator whose duty is to turn the assets into cash and distribute the cash in the order set out in the Corporations Act. If you can possibly avoid this situation do so. In other words this notice is essentially a letter telling you that on a certain date a liquidator will be appointed by the courts to take control of your company if you don’t pay the debt? If you have been issued a wind up notice call us now on 1300 879 867.
Who can issue me a Wind-Up Notice?
Anyone you owe money to and haven’t paid. The creditor who obtains the appointment of the liquidator, and the liquidator, take priority in relation to their costs as do certain employee entitlements. The balance is distributed equally between unsecured creditors.
Will I be personally liable for my company's debt?
Then a liquidator will be appointed and you will no longer be the director of your company. The court will appoint a liquidator who then assumes full control of your company, all of the customers, bank accounts, assets, cash, money that’s owed to the company and your premises is no longer yours. Put simply it’s over. The business you have built over the years is no longer yours. All of the assets will be sold, your office, shop of factory will be taken over by the liquidator (they will even change the locks) you’re services are no longer required. Every aspect of your business will now be under the management of the liquidator.
Do I have any options prior to the liquidators taking over my business?
Yes. At Bankruptcy Advice Pty Ltd we offer a free initial consultation to help you work through this issue. Our team of specialists can spare you enormous stress. However, you must act quickly to ensure you have the most options! Calling us the day before the liquidator turns up is pointless. Call us today on 1300 879 867.
Do I have any options once the liquidators have arrived?
No. The company is no longer in your control.