Make Christmas magical! Tips for separated parents to plan stress-free holiday arrangements, ensuring joy and harmony for the whole family this season.
Insolvency arises when a company faces challenges meeting its debt obligations on time. When a company’s debts outweigh its available cash flow, it becomes insolvent. While fluctuations in business size and market conditions are normal, prolonged losses, low liquidity ratios, or limited access to alternative financing options can elevate the risk of insolvency. Typically, companies experiencing insolvency opt for voluntary administration to address and potentially alleviate their debt burden before resorting to liquidation. This article will explore the administration process and how insolvent companies manage debt commitments.
Your company could be experiencing financial difficulties if it consistently records losses, struggles with cash flow, has outstanding debts to creditors beyond standard trading terms, and faces obstacles in securing financing. Other indications of financial strain include:
If you receive a director penalty notice from the Commissioner of Taxation regarding unpaid and unreported PAYG (Pay as You Go) withholding or Superannuation Guarantee Charge amounts, seeking prompt, professional advice is crucial. Failure to take appropriate steps within 21 days may lead to personal liability for the unpaid company tax.
If your company is insolvent, do not incur further debt. Unless it is possible to restructure, refinance or obtain equity funding to recapitalize the company your options are to appoint a registered liquidator to act as a liquidator or as a voluntary administrator. The three most common insolvency procedures are liquidation, voluntary administration and receivership.
In instances of financial distress, either the company’s director or a creditor can appoint an external administrator. The external administrator assumes control of the company to manage its affairs in an orderly and equitable manner for creditors’ benefit. External administration status can be confirmed by checking insolvency notices on ASIC’s Public Website. Individuals can contact the external administrator to register as a creditor and receive updates if the company is under external administration.
Various forms of external administration exist, including voluntary administration, receivership, and liquidation. Details about external administration types can be found for further understanding.
The amount creditors recover from the company depends on the assets the external administrator locates and sells. Following the deduction of external administration expenses, creditors share the remaining funds, with certain creditors receiving priority over others.
Another approach a director or business proprietor might employ to close a company involves halting trading activities or transferring the business to another entity, a practice known as phoenix activity.
These methods of business closure are deemed unacceptable, particularly if creditors or employees remain unpaid and the company’s affairs remain unresolved at the time of closure.
Receivership occurs when a secured creditor with a security interest over the company’s assets appoints a registered liquidator as a receiver or receiver and manager. The receiver’s role involves realizing assets to repay the debt owed to the secured creditor. If you are a director and a secure creditor, seeking competent legal advice before appointing a receiver is paramount.
Even in receivership scenarios, you can appoint a voluntary administrator or liquidator to address assets not subject to security interests and handle unsecured creditor claims.
As a valued client of Kingsford Lawyers, we understand the concerns and complexities surrounding dealings with insolvent companies.
Here is how we can assist you:
If you have made payments for products or services not yet received, paid deposits, or hold credit notes or gift cards from an insolvent company, you may be entitled to recover funds owed to you.
To ascertain the insolvency status of a company, we recommend checking reputable news sources or reviewing insolvency notices on ASIC’s Published Notices website. Upon confirmation of insolvency and appointment of an administrator, you can register as an unsecured creditor. The insolvency proceedings will determine eligibility for refunds.
Chargeback rights may apply for clients holding gift cards or who made deposits using credit cards. This allows you to seek reimbursement from your credit card issuer. Timely contact with the issuer is crucial, as conditions and time limits may apply to chargeback claims.
In some instances, insolvent retailers may continue operations under the administrator’s control, honoring credit notes, lay-bys, deposits, or gift cards. However, administrators may impose new conditions, such as additional spending requirements for gift card redemption. We can assist in evaluating these offers to determine their viability.
If you suspect financial distress within a company with which you have dealings and no external administrator has been appointed, you must raise your concerns directly with them. Warning signs, such as delayed invoice payments or dishonored payments, should prompt discussion or escalation. We can explore ongoing trading arrangements or provide legal guidance if direct engagement fails to resolve issues.
Suspicions of deliberate liquidation to evade outstanding debts should be reported to the ATO (Australian Taxation Office). Our team can guide you through the process and address your concerns appropriately.
Additionally, complaints can be lodged with the ATO if the insolvent entity is a sole trader or not a registered company.
At Kingsford Lawyers, we prioritize protecting our clients’ interests and navigating complex legal landscapes with experience and diligence.
At Kingsford Lawyers, we are dedicated to providing tailored legal solutions and strategic guidance to navigate the complexities of insolvency. Contact us today for personalised advice on your insolvency situation. Call us at 1300 244 342 or send us an email at admin@kingsfordlawyers.com.au.
Make Christmas magical! Tips for separated parents to plan stress-free holiday arrangements, ensuring joy and harmony for the whole family this season.
Step-by-step guide for Queenslanders facing arrest. Learn your rights, understand police powers, and get practical advice for protecting your interests.
A comprehensive guide for Australian grandparents navigating access rights after family separation. Learn your legal options and practical steps forward.
WE SPEAK – ENGLISH, ITALIAN, MANDARIN, MACEDONIAN, POLISH, AND RUSSIAN
55 Hudsons Road, Spotswood VIC 3015
2 Currumburra Road, Ashmore Qld 4214
E-13, UPSIDC, Site-IV, Greater Noida India
343791 York House, Green Lane West,
Preston PR2 1XB
© Copyright 2024 KINGSFORD LAWYERS | ALL RIGHTS RESERVED
Reach out to us, and let’s work together towards a solution that brings you peace of mind and a positive step forward.
