One of the biggest decisions you will ever make is whether or not to liquidate your business.
Have you done everything to try and save it? Is there a way to improve sales? Can you cut costs further? Can you put any more money in to keep things going? Should you sell your house and invest in the company? Is there a purchaser or an investor that might get you out of trouble? Should I borrow more from family and friends? Are these questions swirling around your head and keeping you awake at night?
We know they are! The stress of a failing business is immense. The cost of trying to battle on can affect your health and the well-being of your family. For many, it is more than they can stand.
The fact is, sometimes business liquidation is inevitable.
It may come as a surprise that while business liquidation may hurt, it actually has a number of important benefits to directors.
1. Business Liquidation allows a clean break from the past
You’d be surprised the number of times directors say “I have been battling with these problems for the past 2 years. The stress has cost me my health and my family” or “If I had known this sooner, I wouldn’t have lost everything by putting it into a failing company. I should have done this a long time ago”.
It’s perfectly normal to fear the unknown but everything you need to know will be explained to you by The Insolvency Experts so that you understand exactly what to expect from business liquidation. With that information, you’ll be able to make a fully informed decision as to what is the best course of action for you, your family and your financial future.
2. Stop harassing letters & phone calls from creditors, debt collectors, lawyers and the ATO
The moment business liquidation starts we notify the creditors. Instead of chasing you, their focus is shifted onto the Liquidator.
So right from the start, you won’t have to deal with anymore angry phone calls. We will take care of everything to do with the company while you get on with your life. And if a creditor does call you, simply refer them onto the liquidator.
3. Outstanding debts are written off
Mounting debt is incredibly stressful particularly when there is no way to trade out of the problem.
Once a business is in liquidation, all debts incurred by that company, including amounts owed to the ATO, are written off and/or dealt with in the liquidation process.
The reason is that the company is a separate legal entity at law. The company is not the director and this means the director is not personally liable to pay the debts of the company. There is no reason for a director to sell personal assets to pay the debts of a company.
Unless a creditor has a personal guarantee, they have no legal right to seek repayment from you. This means that business liquidation will free you of the creditors you have been trying to placate.
You can move on and focus your efforts in building your future.
4. Placing your business into liquidation will avoid or minimise exposure to Insolvent Trading Claims
If a director allows a company to continue to trade and incur credit without a reasonable expectation that the debt will be repaid when it falls due, the director may be liable for an Insolvent Trading claim.
Directors of failing businesses that trade past the point when a reasonable person would have stopped trading are breaking the law.
Not only can they lose personal assets to an Insolvent Trading Claim, but in the worst cases, they can even lose their liberty. By placing a business into liquidation at the appropriate time, these risks may be avoided.
5. Legal action is halted
As soon as business liquidation commences, all legal claims against the company must stop.
Section 471B of the Corporations Act prevents any person from commencing or continuing with legal actions against the company without first seeking a Court order to do so.
6. Employee Entitlements may be paid through a Government Scheme
Many directors battle against impossible odds trying to trade on so they can pay their employees.
While this is a noble attitude, it’s a little misguided.
Most directors don’t know that if their company doesn’t have sufficient assets to pay employees, there is a government scheme known as the Fair Entitlements Guarantee Scheme that will respond to employee claims.
FEG will pay unrelated employees most of their unpaid entitlements including wages, annual leave, payment in lieu of notice and redundancy if they have lost their jobs due to insolvency.
7. Avoid Personal Liability for Company Tax Debts
The ATO can hold a director personally liable for certain Company tax debts by issuing a Director Penalty Notice.
The good news is that you can avoid that personal liability through business liquidation provided that you act quickly and you meet the criteria.
8. Lowest Cost Business Liquidation Experts
The Insolvency Experts are the lowest cost company liquidation professionals throughout Australia.
We have over 25 years of experience and have dealt with hundreds of people in your exact situation so we know exactly what needs to be done.
More information? To find out more, give us a call on 1300 023 782 or email firstname.lastname@example.org.
Latest posts by Craig Dangar (see all)
- Fighting Drought by Improving Cash Flow - January 27, 2020
- Gift Cards to Stores in Liquidation - January 26, 2020
- Ipso Facto Insolvency Reforms - January 25, 2020
- Implications of Proposed 2020 Removal of CGT Main Residence Exemption - January 24, 2020