Skip to main content Skip to search

Archives for LATEST NEWS

Who Gets Paid First When a Company Goes into Liquidation?

Who Gets Paid First When a Company Goes into Liquidation?
When a company goes into liquidation, the most common question is what will happen to the assets of the company and in what order do people get paid.

If you are owed money by company which CRS is handling you will be able to keep up to date with the liquidation process by using our creditor portal. We load all reports we issue to creditors onto our website portal so you can view them at a time which is convenient to you.

CRS can handle all types of company liquidations:
1) Creditors’ Voluntary Liquidation;
2) Members’ Voluntary Liquidation; and
2) Court Appointed.

The process to start a liquidation
If your company is insolvent it can be wound up through a Creditors’ Voluntary Liquidation or by the Court. If a creditor is owed money it can apply to the court for a Court appointed liquidator to be appointed. Whilst a Creditors’ Voluntary Liquidation (CVL) sounds like a creditor will initiate the winding up, it is actually initiated by the directors and members of the company.

Who gets paid in a liquidation and in what order?

Secured creditors who hold security over all of the company’s assets are paid first and if there is any surplus after the secured creditor is paid, then the order of payment for the other stakeholders is as follows:

The costs of liquidation;
Priority unsecured creditors (employees); and then
Unsecured creditors.

If you are considering a company liquidation, you need to consult with an insolvency specialist. At CRS Insolvency Services, our consultants are all highly trained in corporate insolvency assignments. We will provide professional advice to help you make the best decision for your company while avoiding personal liabilities. Contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice now.

Read more

Tips for Managing Business Tax Debt

Tips for Managing Business Tax Debt

As a company owner, it is essential to be proactive in managing your business tax debt. If you neglect your business tax obligations, it may lead to dire legal consequences. The ATO can issue you with a statutory demand, garnishee order or a director penalty notice. Read below for some tips on managing your business tax debt.

Maintain your financial records
If you are struggling with business tax debt, it is important to maintain accurate financial records. Make sure your cash flow statements and profit and loss statements are updated to reflect your company’s position. This is essential to gain a true understanding, and to plan how to move forward accordingly.

2) Prioritise your business tax debt
Ignoring your unpaid business tax debt will only cause more stress and it will also exposure you to personal liability. Make sure that you continue to lodge your business activity statements on time. Failure to lodge your business activity statements within 3 months of their due date will result in personal liability of the company director.

3) Organise a payment plan
Once you know how much you can afford to pay back on a consistent basis, contact the ATO and organise a payment plan.

4) Consult an expert
If you are still unsure, we assist businesses who are concerned about their solvency and provide professional advice here at CRS Insolvency Services. We are not biased towards an insolvency appointment if that can be avoided. If you would like more information, please call our 24 hour insolvency advice line on 1800 210 073. We offer FREE initial advice.

Read more

What is a statutory demand?

A Creditors’ Statutory Demand is a formal demand served by a creditor against a debtor company, requiring the debt to be paid within 21 days of service. A creditors’ statutory demand can be served under s459E of the Corporations Act (Cth).

Although it was not designed to be a debt recovery tool, there are dire consequences if a company ignores a statutory demand, as it will trigger the ability for the creditor to commence winding up proceedings against your company.

There are several strict requirements in which a statutory demand must abide by.

The minimum value of a debt to be demanded must be more than (as at the date of publication). This includes any interest on the debt.

The statutory demand must be in the approved form (Form 509H), as per Section 459E of The Corporations Act 2001. This means it must:

  • Be in writing;
  • Be signed by or on behalf of the creditor; and
  • By served at the debtor company’s registered office.

The nature of the debt must not be in respect of unliquidated damages or prospective liabilities.

If you have received a Creditors’ Statutory Demand and you cannot pay the debt you need to consult with an insolvency specialist immediately. At CRS Insolvency Services, our consultants are all highly trained in corporate insolvency assignments. We will provide professional advice to help you make the best decision for your company. Contact CRS Insolvency Services on 1800 210 073 for 24/7 free expert advice now.

Read more

What is the difference between Liquidation, VA & Receivership?

What is the difference between receivership, administration, and liquidation?

 

As a company director, you may have heard of the words receivership, administration, and liquidation but you are not sure about the differences.

There are significant differences between each type of insolvency appointments and they have different consequences for creditors and other stakeholders.

 

Receivership

Normally, Receivers are appointed by a secured creditor who holds security over some or all of the company’s assets. The Receiver will collect and sell company assets to repay the secured creditor. Their responsibility is to the secured creditor who appointed them and not general unsecured creditors who may also be owed money.

 

Voluntary Administration

Usually a Voluntary Administrator is appointed by the directors of the company.  This type of appointment is chosen when the company is still trading but has unpaid debts which it cannot pay. The administrator will act for all creditors (even a secured creditor) and will carry out detailed investigations and prepare a report to all creditors.  At the end of the administration process, creditors will be asked to vote on 3 possible outcomes which are explained below:

 

  1. Enter into a Deed of Company Arrangement (DOCA):
    A director can propose a Deed of Company Arrangement which is a formal agreement between the creditors and company to compromise the debts of the company.  The primary goal is for creditors to receive a better return compared to if the company was wound up and placed into liquidation.

 

  1. Enter into Liquidation:
    If no DOCA is proposed and the company is insolvent then the most likely outcome is liquidation.

 

  1. Return control of the company to the directors:
    If none of the above options are passed at the meeting, creditors can resolve to return the control of the company back to the directors.

 

Liquidation

If a company is placed into liquidation the liquidator will take immediate steps to stop the company from trading and will also sell off any assets. Once the assets have been sold, the liquidator will disburse the surplus funds in accordance with the priorities as set out under the Corporations Act.

 

If you want to enquire about receivership, voluntary administration or liquidation, please call our 24 Hour insolvency advice line on 1800 210 073.  We offer FREE initial advice.

 

Read more

How do I close my business if I’m insolvent

How do I close my business if it is insolvent?

 

If you’ve recently become insolvent, closing your business can be a complicated and emotional time. All directors should understand the options and make a decision as soon as possible. Directors have a duty to prevent their company from trading while insolvent as you need to take the interests of your creditors into account. We’ve listed some of those key options if you’re looking to close your business as a result of it being insolvent.

 

Liquidation

Liquidation is the most direct and efficient way to wind up your company if it has ceased to trade or you want to cease trading. Once you appoint a liquidator, the liquidator will take steps to make sure the business has ceased trading and will then sell the remaining assets. Once the assets have been sold the liquidator will distribute the surplus funds in accordance with the priorities as set out under the Corporations Act.

 

Voluntary administration

If your company is still trading but it is insolvent (or likely to become insolvent) and you want to try and save it then you may wish to consider a voluntary administration. A voluntary administration is easy to initiate if the majority of the company’s directors pass a resolution to appoint a voluntary administrator.  Once appointed the voluntary administrator will take control of the company and the director’s powers will be suspended.  The voluntary administrator will investigate the company’s affairs and report to creditors on the future of the company.  At this point the directors can put a proposal to creditors for a Deed of Company Arrangement. Usually a Deed of Company Arrangement will set out a proposal to restructure the debts of the company which may involve asking creditors to accept something less than what they are owed. The voluntary administrator will call a meeting of creditors, at which time creditors will be asked to vote on 3 possible outcomes:

  1. For the administration to end and pass control back to the directors;
  2. For the company to enter into a Deed of Company Arrangement; or
  3. For the company to be wound up and placed into liquidation

 

Receivership

This process can exist simultaneously with voluntary administration or liquidation and it is not a direct pathway to closing an insolvent business. Only a secured creditor or a Court can appoint a Receiver. The Receiver will only protect the interests of the secured creditor who appointed them.

 

Things to consider

Your company will only officially be closed after it has been deregistered with ASIC.  If you have more than $1,000 owing to creditors or your company has assets you cannot apply to ASIC for it to be deregistered and instead you must appoint a liquidator. After the liquidation has finalised the liquidator, they will apply to ASIC for it to be deregistered.

 

At CRS we are here to help you and we operate a toll FREE 24 hour advice line. Call now on 1800 210 073 to receive free and impartial insolvency advice today.

Read more

Insolvency Reforms – Are they enough to promote Innovation and Entrepreneurship in Australia?

With the rise of Australia’s “Start-up culture”, the Australian Government has recently looked at various measures to promote and support Innovation and Entrepreneurship.

Most small to medium enterprises (SME’s) fail within the first three years of operation. This can be due to many reasons such as:

*Lack of working capital

*No Strategic direction

*Poor planning

*Lack of cash flow management

*No record keeping

Due to the Government’s support for business in Australia, the Treasury Laws Amendment (2017 Enterprise Incentives No. 2) Act 2017 (Enterprise Act) was passed in September 2017 and introduced two key inclusions to the Corporations Act 2001 (Corporations Act):

  1. Safe Harbour from insolvent trading – This helps provide a legal framework for directors leading to better outcomes for the company and its creditors while providing protection from being pursued personal liability for insolvent trading.
  2. A Stay on enforcing rights due to arrangements or restructures –This relates to ipso facto rights in contracts/agreements.

 

Ipso facto Reforms

Why are these reforms important and what are the effects for parties to contracts moving forward?

Contracts with third parties often what allows its trade, with contracts for suppliers, utilities, and land. Ipso facto clauses allow counterparties to terminate or modify a contract if a company becomes insolvent.

This reform will make ‘ipso facto’ clauses unenforceable while a company is attempting to restructure under:

  • voluntary administration;
  • scheme of arrangement; or
  • a managing controller has been appointed to the company property.

 

This creates new benefits for the restructuring a company through an insolvency regime and may improve the potential return to creditors by the company getting better value from its assets.

The reforms only affect the rights under contracts, agreements, arrangements entered after 1 July 2018 onwards.

The success of these new provisions will take time to prove their worth in helping businesses take more risk and calculated measures. If you want to know how these reforms may affect you, contact the 24/7 CRS Insolvency Services hotline on 1800 210 073 to receive free and impartial insolvency advice today.

Read more

Federal Parliament introduces new Safe Harbour Laws

Federal Parliament introduces new Safe Harbour Laws

 

The Australian Government passed new Safe Harbour Laws in September 2017 which will soften the current harsh insolvent trading laws.  The current insolvent trading laws are designed to protect creditors from when a company director knowingly continues to trade when the company is insolvent. The purpose of the Safe Harbour Laws is to give company directors protection from “insolvent trading” so they can trade on with confidence without the risk of becoming personally liable for insolvent trading.  The new Safe Harbour laws do not remove the current insolvent trading laws, as they will remain, however if a company director successfully implements a Safe Harbour plan then they will not be personally liable for any insolvent trading claim if the company later becomes insolvent.

 

To be protected under the Safe Harbour Laws the director’s plans must reasonably lead to a better outcome for the company’s creditors as a whole.

 

So what do you need to do to have a better outcome?

Company directors will also need to seek professional advice from a suitable qualified professional to ensure that the Safe Harbour plan will lead to a better outcome. Whilst the legislation doesn’t define who is a suitable qualified professional, practice would suggest that they may be an accountant or solicitor who has experience in insolvency.

 

If you would like to stay informed about the latest insolvency news, our team of experts here at CRS Insolvency Services are always ready to help on 1800 210 073. Our toll-free hotlines are open 24/7 so there will always be someone available to help you.

Read more

What Are Safe Harbour Laws?

What Are Safe Harbour Laws?

 

The Safe Harbour legislation was passed on Tuesday 12th September 2017 allowing company directors to trade while their company solvency is still questionable. The legislation does not remove insolvent trading laws but once a director enters a ‘safe harbour’, they are no longer personally liable if they to produce a better outcome for the company and creditors. In other words, the new legislation is a licence to be insolvent whilst inside the harbour.

Limitations

There has been criticism that the laws cause directors to limit personal liability by prematurely seeking the appointment of a voluntary administrator in circumstances where a company is still viable. This goes against the original purpose of the voluntary administration regime.

The safe harbour cannot be used by a director where the company failed to maintain proper books and records, failed to pay employee entitlements when they fell due or failed to file documents as required by taxation laws. The safe harbour does not apply where such failure was not in compliance with these general requirements, or there was more than one failure in the preceding 12 months. As a director, they will still be liable for a breach of directors’ duties or failing to comply with any applicable continuous disclosure obligations.

Moving Forward

 

The operation of the safe harbour laws will change the way that directors handle a company’s solvency issues. These changes will encourage directors to think about how they can attempt to restructure or turnaround the company without the concern of being held personally liable for company debts incurred at or after this time.

 

Seek professional advice

You should seek professional advice immediately if your company is heading towards voluntary or involuntary company liquidation. Contact the 24/7 CRS Insolvency Services toll free hotline on 1800 210 073 to receive free and impartial company liquidation advice today.

Read more

Can a Wind Up Application be Revoked?

Can a Wind Up Application be Revoked?

A winding up notice is usually issued by a creditor who wants to enforce their unpaid debt by having the company wound up and a liquidator appointed. Once a winding up notice has been issued it is very difficult to have one set aside.  If a winding up notice has been issued and the company wants to oppose the application, the company will firstly need to pay the petitioning creditor’s debt (prior to the court date) and secondly the company will need to prove to the court that the company is solvent and can pay other creditors.

 

Opposing a wind-up notice

 

As mentioned above, if the company wishes to oppose the winding up notice, the court will most likely need the company to put on evidence (usually in the form as an expert accounting report) demonstrating that the company is solvent and can pay all creditors as and when the debts fall due. If the court is satisfied with this evidence and the company has paid the petitioning creditor’s debt in full, then the court may dismiss the winding up application.

 

How to avoid being issued with a windup notice

 

Before receiving a wind up application the company should have received a creditors statutory demand.  If you receive a creditors statutory demand, the company will have 21 days to either pay the debt or apply to court to have it set aside.  If the company ignores the demand and does not file an application in court within the 21 day period, then the debt will be assumed to be owing. The creditor will rely upon this default in its winding up application.

 

What happens if I do nothing?

If you receive a wind up application and you don’t do anything, the court will assume that the company is insolvent and will appoint a liquidator at that hearing.  The petitioning creditor usually nominates a liquidator of their choosing.  After you receive a wind up application it is too late to appoint a liquidator of your choosing.

 

Seek professional advice

If your company is heading towards voluntary or involuntary company liquidation, you should seek professional advice immediately. Contact the 24/7 CRS Insolvency Services hotline on 1800 210 073 to receive free and impartial company liquidation advice today.

Read more

New insolvency law reforms. What does this mean for you?

New insolvency law reforms. What does this mean for you?

The government introduced new Safe Harbour laws and a restriction on the enforcement of ipso facto rights. How will this affect you?

The Safe Harbour offers company directors protection from personal liability for insolvent trading. This protection will only be available if the company director puts in place a suitable plan and engages a suitable advisor to oversee and help implement the turnaround plan. Also to be eligible the company needs to be up to date with its taxation liabilities and lodgments.

If he plan is properly documented and supervised by a suitable advisor the director will not be personally liable for insolvent trading if the company later fails and goes into liquidation.

The ‘ipso facto’ reforms aim to limit counterparties from exercising contractual rights as a result of the company entering into administration, a scheme of arrangement or receivership (for example this should stop a landlord from cancelling a lease just because the company has gone into administration). The new ipso facto laws will not be retrospective.

The government is also considering a new system whereby they will introduce a director Identification Number regime, which will allow government agencies to monitor directors across different government databases. This will help government agencies tackle anti phoenixing.

If you would like to learn more about company liquidation, then please contact CRS Insolvency Services on 1800 210 073 to speak to our friendly and expert insolvency specialists.

Read more