Will the company liquidation affect my personal credit rating?
Credit reporting agencies will record a company Liquidation against your personal credit file. If your company is insolvent it is important that you can demonstrate that you acted in an appropriate manner and complied with corporate laws. With a Creditors’ Voluntary Liquidation you may be able to better explain the circumstances in which the company was placed into liquidation. If you do not control the process and have an insolvent company wound up voluntarily a creditor may take control of the process and have a court liquidator appointed.
If you have provided a personal guarantee and the company defaults on the facility then the provider of credit (usually a bank, finance institution or trade suppliers) can pursue you personally for the debt. The credit provider does not need to wait for the company liquidation to be finalised before they can enforce the personal guarantee. If you have provided a personal guarantee and you need to place your company into liquidation, then you may need to make a personal arrangement with that creditor outside of the liquidation process.
Insolvent trading can only be acted upon by a company liquidator or a creditor (with the approval of the liquidator). A director of a company can only be liable for insolvent trading if the company was insolvent when a debt was incurred. Liquidators have an obligation to review the books and records of the company and form a view as to whether the company traded whilst it was insolvent before it was placed into liquidation. Liquidators must report their findings to the Australian Securities and Investments Commission and to the creditors. If the liquidator does not have sufficient funds (from the realisation of company assets) then the liquidator may require funding to commence insolvent trading proceedings. Liquidators can also apply to ASIC for funding.
ATO Directors’ Penalty Notice
The ATO can issue a company director with a penalty notice under the Income Tax Assessment Act. If you receive a Directors’ Penalty Notice from the ATO you must act promptly. You have twenty one (21) days from the time the notice was issued to do one of the following:
- Pay the debt in full; or
- Enter into a repayment payment with the ATO; or
- Ensure that the company has been placed into a Creditors’ Voluntary Liquidation (within the twenty one (21) day period); or
- Place the company in Voluntary Administration (within the twenty one (21) day period).
If you have not done one of the above within twenty one (21) of the notice being issued then you may become personally liable for the amount listed in the notice. To learn more about ATO Director Penalty Notices
Call us today if you would like any more information about how a company will affect your personal credit rating on our toll FREE advice line on 1800 210 073.