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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.

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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.

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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.

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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.

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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.

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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.

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Can I start a new business after liquidation?

Can I start a new business after liquidation?

You may think that as a director of a failed company that it isn’t possible for you to start another company any time soon. You can start a new company and act as the director, however, there are some important things you should know before venturing into your next business in order to be prepared and avoid any other forms of insolvency down the track.

ASIC does have the right to disqualify you from acting as a director of a company if within the last 7 years you have been a director of 2 companies that have gone into liquidation and your creditors have received less than 50c on the dollar. This simply means that for every dollar you owe to your creditors, they have received less than 50c. If ASIC feel this is necessary, the disqualification may last up to 5 years. Disqualification can even reach a maximum of 20 years but more modest disqualifications are most likely.

In order to avoid any form of director disqualification, it is best to understand and evaluate what happened with your previous business that led to its insolvency. It is important to be aware that ASIC maintains a register of companies which have been placed into liquidation and the liquidation many also appear on your personal credit file.

To find out more about your options as a director, 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.

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The Answer to Your Director Penalty Notice

The Answer to Your Director Penalty Notice

As a director embarking on a new business venture, you become assigned a number of
responsibilities. One of the most important is becoming responsible for your company’s taxation obligations.

But what does this mean?

Every Australian business has a legal responsibility to file its Business Activity Statement (BAS) every quarter. If you fail to lodge your BAS within 3 months of its due date, then the company director(s) will become personally liable for the PAYG and superannuation component. To collect these amounts from the director (personally), the Australian Taxation Office, has the power to issue a Directors Penalty Notice (DPN) with a lock down notice.

If your company has lodged its BAS within 3 months of their due dates and the
ATO issues a DPN, then you can avoid personal liability if within 21 days you
either:
– Repay the company’s full outstanding tax debt from their own pocket; or
– Appoint a liquidator to cease company operations; or
– Appoint an administrator to enter the company into voluntary administration.

In order to know which course of action is most suitable as a director, 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.

https://crsinsolvencyservices.com.au/what-is-a-director-penalty-notice

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What Investigative Powers Does a Liquidator Hold?

What Investigative Powers Does a Liquidator Hold?

When a company goes into liquidation, the appointed liquidator in charge has to complete a minimum level of investigations to determine whether or not there are assets to be recovered for the benefit of creditors.

The liquidator must then compile his or her findings into a report to the Australian Securities and Investments Commission. This is a statutory requirement as stipulated under s533 of the Corporations Act.

Some of the investigations the liquidator must carry out include:

The company’s history
Why the company failed
Report the claims of employees, secured creditors and nature of the debts incurred
If the company traded whilst insolvent
Whether the directors have committed any offences under the Corporations Act and any other possible claims against them
Whether or not the director made any preferential payments to creditors that may be recovered
Whether the director has been involved in a liquidation previously
Whether the liquidator believes that the director should be banned from acting as a director

In addition to these investigations, the liquidator holds other responsibilities such as collecting and realising the company’s assets, overseeing the distribution of the proceeds of realisation and applying for the company to be deregistered once the liquidation process is completed.

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.

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How CRS Insolvency Services Can Help Relieve Your Company Debt

CRS Insolvency Services are expert insolvency specialists who have years of experience in helping businesses find the most appropriate insolvency solution for them.

So if you are struggling with your company debts, we would like to help you too.

1. FREE initial consultation

At CRS Insolvency Services, we understand that it can be difficult making the first move to help solve your insolvency issues. This is why we offer a FREE initial consultation for everyone who calls our toll-free, 24/7 hotline (1800 210 073). We also offer a FREE initial meeting at our head office in Sydney. If you elect to call our hotline you may wish to remain anonymous until you decide to proceed with a service we offer.

We do this because we want to make sure that we can help and steer you in the direction that is best for you before you make any commitments.

When you call us, you can expect expert advice that is tailored to your situation based on years of experience and knowledge. And everything that is said in the phone call will remain confidential.

2. Find the right option for you

If we believe that we can assist your with your company insolvency, we will explain each of our business debt solutions so that you can gain a thorough understanding.

That way, you can make an informed decision as to which one is the best option for you.

And of course, we will help you make this choice as it can be a very difficult and daunting decision to make.

3. We will see your case from the beginning to end

Once the best business debt solution for your company is identified, we will begin the process in helping you with your company debts with that solution.

We will see your case from beginning to end so you know that you will be working with someone that is familiar with your situation and that you know and trust.

If you are struggling with your company debts, then act immediately. Contact CRS on our 24/7, toll-free hotline for FREE expert advice on 1800 210 073.

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