Pre Liquidation Checklist for Directors and Advisers
There are about 10,000 company insolvencies a year. You’d like to think that Directors and Advisers thought through the process prior to getting on the slippery slide, but that is not always the case. Hence, we have prepared a concise Checklist of matters for Directors and Advisers to consider when liquidation seems the likely outcome. You can get a copy of our downloadable Checklist here. It’s in a handy format. But to give you a taste, here is a list of some of the questions and memory joggers on the Checklist:
- If the company is still trading, how many locations does it trade from?
- How many staff do you now employ?
- The usual process for winding-up a business is to address the practical and physical aspects first. In that situation it would be necessary to: Shut the doors; Stop buying new stock and supplies; Terminate the employment of staff; Notify the landlord; Notify creditors; Sell the remaining assets of the company and bank the proceeds to the company bank account.
- Are you able to undertake those tasks yourself or will it be necessary to have assistance, probably a Registered Liquidator?
- Do you have an asset listing?
- Have you attempted to find a buyer for the whole business, or specific assets?
- Do you have a list of all creditors and the total owed?
- Have you been lodging the BASs on time?
- Does the company’s Running Account with the ATO include amounts for PAYG or Superannuation? (Note: you can be personally liable for that debt)
- It is usual for a Bank to require a Personal Guarantee from a director for any Bank lending or facilities. How much do you owe the Bank and do they have security over your house?
- It is usual for a director to sign a Personal Guarantee for any unpaid rent. How long is left to run on the premises lease and how much is outstanding at present?
- Often trade suppliers will have required a Personal Guarantee from a director as a term of trade. Did you sign any such Terms of Trade or any other specific Personal Guarantees?
- Consider when you first thought the company might be insolvent and whether the company incurred any new debts after that time?
- If it turns out you need to appoint a Liquidator, is it likely all directors and shareholders will be in agreement with that approach?
- Have you been the director of any other companies that have entered liquidation in the last seven years?
- When was the last set of financial accounts prepared and for what period?
- Do the accounts show Director’s Drawings or “Director Loans” in the assets section of the Balance Sheet?
I don’t have the space, or typing speed to explain why, but there are good reasons for all of the above questions!