The team at Brooke Bird are experts in providing guidance to businesses facing financial difficulty.

People in financial distress often don’t know where to turn for the right advice. Unfortunately, many find themselves engaging with unregistered or dodgy advisors who promise the world and end up adding to the distress. Government regulators warn individuals and business owners about the hazards associated with getting involved with these predators. You may wish to read further about the risks and learn about false promises that can sound enticing to those looking for a way out.

Read the article: AFSA warns people to steer clear of dodgy insolvency advisors.

ARITA, with the support of CAANZ and CPA Australia, has released a special guide for directors that outlines the steps they can take when considering their options at this troublesome time.

Download the guide: Director’s duties in uncertain financial times

If you have received a Director Penalty Notice from the ATO, you may become personally liable for the debts of the company. The Notice will detail how to avoid personal liability. This often includes:

• having the company quickly wound up (liquidation),
• appointing a Voluntary Administrator
• paying the amount owing; or
• comply with a repayment plan agreed to by ATO. If the repayment plan is not completed, you will be automatically personally liable for any shortfall

You have a very limited time to respond to the Notice. It is critical that you make an appointment with Brooke Bird to seek immediate professional advice if you are in receipt of such a Notice.

The Notice is required to be sent to the director’s personal address based upon the records maintained by the Australian Securities and Investments Commission.

The director of a company has a legal duty to remain on-top of the company’s financial position. This includes maintaining books and records, taking steps to ensure the business remains solvent to the best of their ability and addressing any solvency concerns by seeking professional advice in a timely manner.

Insolvent trading is when a director knowingly incurs new debts when the company is insolvent. When this occurs, a director can become personally liable for these new debts.

If you are a sole trader, you are personally liable for any financial issues related to your business. However, if you comply with all of your legal obligations as a director of a company, the company is liable for its own debt.

If you fail to fulfil your duties as a director, both civil and criminal action can be taken against you personally and you may also be ordered by a court to pay compensation to the company or creditor.

If you would like to know more on this topic, further content can be found HERE.

A personal guarantee is a written promise from a business owner or company director that guarantees payment on a lease or loan in the event that the company cannot pay. In the event of where a debt is not paid a creditor can seek to obtain the guarantor’s personal assets.

Employees should be advised as soon as a director knows that a business is being liquidated or being put into voluntary administration. Although this is a difficult situation for an employer to be in, it is important that they are transparent with their employees, and give them the most time possible to consider their future and begin planning their next steps.

Employees have a priority above other creditors when a distribution from a liquidated company is paid.  They can also make a claim on the Federal Government’s Fair Entitlement Guarantee (FEG) to have their entitlements paid quickly in the event of an insolvency appointment.