Are you a sole trader or trading through a company or a trust?
Are the following issues weighing on your mind?
- Business debts piling up
- Cash flow problems
- Losing sleep over how you will pay your employees and suppliers
- Being chased for money by creditors, government agencies or suppliers
- You have lost the passion or motivation that you first had for your business
Applying for insolvency may help clear your state of mind
There are several reasons why businesses find themselves in financial difficulty. It can be from poor cash flow as a result of adverse economic conditions, unfavourable legal action being taken against the company, ATO debt issues or unpaid creditors being some of these reasons.
Regardless of what the matter may be, there are several options available to deal with your debt concerns. These include assistance in reaching an arrangement with your creditors, help required with winding down your business, or support with bankruptcy, administration or liquidation processes.
We, at the Bankruptcy Advisory Centre Pty Ltd have the experience to guide you through these processes and take the burden off your shoulders!
We encourage you to call us at 1300 887 210 for a complimentary, no obligation chat to discuss the right solution for your specific situation.
Insolvency and Insolvent Trading explained simply
An insolvent company is one that is unable to pay its debts when they fall due for payment. An investigation into insolvency is focused on when the company or person (the entity) ceases being able to pay its debts as they need to be paid, and it is about the inability to pay significant debts. It must be clearly noted that just because an entity was not paying its debts does not mean that is was unable to do so and was insolvent. They may have decided not to pay for some other reason. For insolvency, the company/entity must have been unable to pay the debts from a lack of resources to do so.
Insolvent trading thus occurs when directors allow their company to incur debts when the company is insolvent, which can result in civil penalties, compensation proceedings and criminal charges. The liquidator is then able to make a compensation claim against a director if those debts are unpaid when the liquidation commences. In such a situation, a director may be held personally liable to compensate creditors for the unpaid debts incurred from the time the company became insolvent to the start of the liquidation.
Which Parties can make Insolvent Trading Claims?
Liquidators will have the first opportunity to make insolvent trading claims. If they decide not to make a claim, creditors may start their own actions, but creditors’ claims are limited to the amount of their individual debt.
Why are Liquidators allowed to make these Claims?
By law, liquidators are obliged under the specific provisions of the Corporations Act 2001 to investigate the existence of any insolvent trading claim, and if so, take appropriate action. Furthermore, directors have a positive duty to prevent the company from trading if it is insolvent. Under the Corporations Act, failing to stop a company from incurring debts if it is unable to pay is a breach of the directors’ duty. Directors may have to pay compensation to the company for losses creditors have incurred under that breach of duty.
What are the signs to look out for if your company is heading towards Insolvency?
- The company is unable to pay its debts as and when they are due and meant to be paid in a timely manner.
- The company is unable to offload assets at short notice to meet any debts owed, without affecting the ability of the company to continue to trade comfortably at a reasonable profit margin.
- Key internal stakeholders have resigned citing concerns about the company’s financial health or trading position.
- Agreements with financiers have gone into default or are likely to go into default.
- Trading losses are continually occurring and/or cash flow is problematic. Sale of stock is slow, and/or debts aren’t collected systematically.
- An absence of a budget or business plan or one that is insufficient to monitor operations and the financial position of the company is not known.
- Funding facilities has reached its limit and you are unable to negotiate a new limit or further financing.
- The company is unable to produce accurate financial information on a timely basis to comply with regulatory requirements or other third part requirements.
- There is no recovery plan even though directors are considering continued funding for trading losses.
- The company is paying your creditors outside of agreed terms, or in amounts that are not specific to invoices or your suppliers have placed you on a cash- on- delivery (COD) terms only.
- Taxation obligations aren’t being paid when due such as PAYG, GST or Superannuation due to cashflow or the reluctance of the directors to lodge such returns.
- Legal actions have been taken or notice has been made of such action against your company.
- The company is making frequent credit payment arrangements and are in default.
Please note that there are only some of the indicators for you or your company to consider in determining whether your company is facing insolvency challenges and directors require appropriate advice, from qualified professionals.
What are the next steps if I think my company is facing insolvency?
It is important to remember that if you have received reliable advice that your company is facing insolvency, that you cease incurring any additional debt. Unless you have the ability to restructure, refinance or obtain further equity funding, your options are to consider going into voluntary administration or liquidating your company. For more details on going into voluntary administration or liquidation, please refer to the information here.
Need more information about Insolvency? Click here.
As a Trustee in Bankruptcy, Ross Thomson is often required to think outside the box. As well as creative thinking, Ross brings compassion to the table.
For Ross, it’s important to see the people behind the financial problem –not just numbers.
Ross recently helped a bankrupt client who lives in a retirement village with her seriously ill husband.
The unit she & her husband live in is not owned by them, but subject to a 20-year lease.
The money to be repaid by the management was due only at sale, when the client finally left the retirement village.
Sale of the unit was likely to take several years &, if he did sell the couple’s unit, Ross realised he would be effectively evicting them from their home, without resources or family to help them.
Ross decided to contact the retirement village management & put a proposal to them that they prepay some of the moneys they would otherwise pay the client.
The village management considered the proposal & have agreed to prepay some of the moneys otherwise due.
The client is relieved that she will not be evicted & can now concentrate on helping her husband through his health issues.
The moneys paid represented about 75% of what would have been available to creditors if they waited two years.
It is a win for the client and for the creditors.
I made an appointment with Andrew after finding him on google. I was nervous and apprehensive about what to expect but he made the process of bankruptcy extremely uncomplicated and stress free, allowing myself the opportunity to get the fresh start I was so desperate for. Thank you Andrew I could not recommend you enough.
Making the decision to go bankrupt was not easy however once I had spoken to Andrew i felt all my anxiety disappear. Andrew does not judge you and he has an innate ability to put you at ease. He took care of the whole process for me again reducing the stress involved with completing paperwork.
Thank you very much.
I will definitely recommend Andrew Bell to anyone contemplating bankruptcy. Don't wait! Andrew is there to help. With his knowledge, he can advise you of the best path to take and assist with the mind boggling paperwork.
Best of all, he is there for you through your entire bankruptcy period. Get your life back, it's not as bad as you think. Thank you Andrew for lifting the burden and allowing me to move on.
I saw Andrew for 'advice only' on possible bankruptcy due to a divorce. Left an hour later with the paperwork all done and feeling like a new person!
Andrew was extremely welcoming and made me feel so comfortable with my decision to proceed immediately.
This was the best investment I have ever made and cannot speak highly enough of Andrew. He doesn't just give excellent service his follow up afterwards is amazing. Thankyou Andrew you made my 'new' life so easy to achieve!
Andrew was very helpful in helping me through the bankruptcy process, as a single mother left with a massive debt from my ex and our previous marriage. I was struggling to keep my head above water on a week to week basis.
Andrew made me feel at ease immediately and helped me every step of the way, he happily and professionally answered any and all questions I had before, during and after the process. Thanks so much for your help Andrew!
Would highly recommend Andrew to anyone having financial difficulties. Andrew made me feel very comfortable - he took care of everything and keep in regular contact with me throughout the whole process.
Service was fantastic and he also keep in regular contact with me when everything had been finalised Thanks Andrew! can now get my life back on track.
Very prompt service and excellent source of knowledge and information, I highly recommend Andrew's service for a quick turn around of circumstances.
Andrew put my mind at ease in one easy appointment. Very satisfied with the outcome and service provided. Highly recommend Andrew.
Andrew was a steadying hand with his advice.Showing that things aren't as bad as first thought nor any obstacle insurmountable. If you have questions needing answers, Andrew is the person to ask. Thanks for your advice Andrew.
Andrew was very knowledgeable, caring, helpful and compassionate when I went and saw him. He made me feel that I wasn’t the loser and failure that I thought I was being. Even down to the box of tissues on the table.. which I needed. Highly recommend to go see Andrew if your struggling. There is life after!
Andrew and his team do an excellent job of helping their clients with bankruptcy advice and it is a pleasure to work with him.
Don't hesitate contacting Andrew, I was stressed, struggled sleeping through debt. Andrew put me at ease. He listened to my situation and we decided on my next move. Andrew is professional and easy to talk too. I would recommend highly to anyone who wants help to give him a call. I appreciate your support Andrew. Regards Brett.
Andrew has given me back my life!!! After living paycheck to paycheck, I didn’t know what to do. Until I made the big step and booked an appointment with Andrew. As soon as I left his office I felt a huge weight lifted!!!
Andrew was prompt, organised, friendly and efficient with the processing of my documents and made everything very simple for me so I didn’t need to deal with the added pressure and stress. Thank you Andrew for allowing me to start afresh and getting it done within a matter of weeks.
Fill the form below to download our Free Expert Bankruptcy Guide