General recipes
The Liquidation Process – it can be fast
Up until a few years ago, the process to appoint a liquidator was quite clunky. The law changed in 2010 and it has allowed us to streamline our systems - now we can get the appointment process in a Creditors Voluntary Liquidation done in a few hours. Well that’s the case for Dissolve anyway, maybe not others! After appointment, there is a lot of work the liquidator has to do, but the directors and shareholders don’t have to worry about most of that. I’ve explained below the full process of a Creditors Voluntary Liquidation and highlighted where the director and shareholders are involved. Click Here To Read More
March Corporate Insolvencies remain high
ASIC has recently released their update for corporate insolvency statistics for March 2012. They reveal that March, whilst off February’s all time high, was another bad month for corporate Australia with 1,014 insolvency appointments. This is the second worst March on record and the fifth worst month overall. If that is sounding familiar, well, that’s because it is! Corporate insolvencies have been bouncing along at or near all time highs for about a year now. Click Here To Read More
Director Personal Liability for company debts – top 5 ways to get stung
A common question we are asked is whether a director is personally liable for a company’s debts. The easy answer is “no”. But there are a number of ways a director can be made personally liable. The ones that get the most coverage are insolvent trading and director penalty notices but there are other more common ways. Click Here To Read More
Liquidation and Director Banning – what are the chances?
We are often asked by a director whether or not they will be banned as a director if their company goes into liquidation. Be aware that there is nothing illegal about simply being a director of a company that enters into liquidation and there is no automatic banning as a director. But it can happen.
Circumstances resulting in Director Banning
There is provision under the Corporations Act (Section 206F) for ASIC to disqualify a person from managing a corporation for up to 5 years if the person has been an officer of two or more companies that have entered liquidation within the previous seven years. ASIC is required to consider a few things in determining whether or not it should ban a person from acting as a director:
- whether any of the companies were related to one another;
- the person’s conduct in relation to the management of the company; and
- whether the disqualification would be in the public interest.
Also, if a person is convicted of an offence that is a contravention of the Corporations Act and is punishable by imprisonment for a period of greater than 12 months, then the person is automatically disqualified from acting as a director of a company for the same period of time (Section 206B). Remember, it is quite a rare thing for a Director to be convicted of an Offence under the Corporations Act.
What happens in the real world
That’s the law above, but it is a little different in practice. Remembering that there are over 10,000 company liquidations every year and in hundreds of those cases the situation will arise where a director has been a director of two or more companies entering liquidation. It is simply beyond ASIC’s resources to seek to ban every director that could be banned. Every year there are a couple of hundred director bannings out of the 10,000 or so company liquidations. So in practice ASIC will look at a director banning where there are a number, probably well in excess of two, “strikes” against a directors name.
Directors should rightly be concerned about their ability to act as a director in the future. However, if it is the first time a director has been a director of a company that enters liquidation, ASIC cannot seek to ban the person unless there are specific offences. If a director has multiple “strikes” as a director then it is possible that they will be banned by ASIC.
Liquidators – how to check their registrations and credentials
Considering appointing a Liquidator and want to check on a Liquidator’s registrations and credentials. It’s easy and can be done online. So why am I telling you this? Because, there are a few tricks to be aware of. Click Here To Read More
Changes to Director Penalty Notice legislation back on the agenda
You may remember the government proposed changes to the Director Penalty Notice legislation in last years budget. The first draft was put forward in June 2011 but was widely condemned by directors and liquidators alike for being too wide reaching. That draft was scheduled to go before parliament in November 2011 but it was withdrawn for further industry consultation.
The Treasury department have just made the results of the consultation public with the issue of a new Exposure Draft detailing the proposed legislation in its current form.
Bad News Continues in 2012 – Business Stress Report
Every quarter here at Dissolve we break down the most telling corporate insolvency, liquidation and restructuring statistics into our Business Stress Report. Our latest report reveals that the bad news for corporate Australia is continuing into 2012. January 2012 is another record high month for the number of corporate insolvencies and the cost of those insolvencies continues to run at over four times pre-GFC levels. You can download the full Report here and I’ve given a summary below. Click Here To Read More
ATO – the unwritten process of enforcement
Most businesses are aware that the ATO has a range of strong enforcement actions it can use in pursuing debts from companies: Director Penalty Notices; Garnishee Notices; Demands and Wind-up Petitions. What the ATO doesn’t publish is the order and timing of those actions. At Dissolve we receive calls from directors and their advisers every day so we get to see on-the-ground what actions the ATO takes and when. Click Here To Read More
Bad Liquidator
In case you’ve missed it in the media, liquidators are bad (apparently). I’ve provided details in a previous blog about ASIC’s supervision of liquidators. I’ll disagree with the general proposition that liquidators are bad but there is a bad liquidator who has been brought down by ASIC and the Courts. Check out below the details on that guy and some other ASIC actions against liquidators. Click Here To Read More
And the winner of the iPad2 is…
You might recall we promised to give away an iPad2 to a new subscriber to the blog. Drum roll please….. and the winner is…… Eddie Chau from Chau & Hennessy Professional Accountants in Coffs Harbour. Congratulations Eddie.
