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When will I know if the company if in financial difficulty?
There can be many factors to consider when looking at financial distress. However initially a company starts off in this cycle by not paying critical creditors such as outstanding taxes, utility providers etc. Slow or not paying creditors is symptomatic of a business that has insufficient cash-flow. Decisive action and professional advice must be taken to identify and evaluate the reasons that this is occurring and what steps can be taken to remedy it if possible.
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Can the Australian Taxation Office (“ATO”) pursue Directors personally for certain outstanding company taxes?
Yes, the ATO and other Government Departments, ie the Office of State Revenue may pursue current Directors (and former Directors in certain circumstances) for these company debts. However you will typically receive a document called a “Director Penalty Notice” which will give you fourteen (14) days from the date you get the Notice to act. It is imperative you seek urgent advice from an insolvency professional if you receive such a Notice so that they can explain what options are available to you.
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If I am a Director of a company that is placed into Voluntary Administration or some kind of Liquidation, does this mean that I can still be a director of other companies?
Should you have been involved with several companies that have been placed into external administration and / or committed other offences for which you have been prosecuted by ASIC, then there may be a banning order that has been placed on you prohibiting you from managing a corporation. You can check whether you are subject to a banning order by going to the ASIC website.
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What happens to debts that I have personally guaranteed?
Depending on the type of Corporate Insolvency, upon liquidation of a company then the creditor is able to pursue legitimate guarantees given by related/third parties to the company. It is important that an assessment is made as to the enforceability of such guarantees as there can be situations where they have not been correctly executed or there are other fundamental flaws.
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Will employees receive payment for their entitlements if the company is placed into liquidation?
There is presently a Federal Government Scheme known as GEERS which provides for various employee entitlements upon the insolvency of a business. GEERS does not cover outstanding superannuation. Upon liquidation, the liquidator would notify and provide all staff with claim form and assist them with completion based on the company records available.
Corporate Insolvency matters and the impacts on Directors can be complex depending on the business conducted by the company and other relevant factors. Jones Partners have a depth of knowledge across many industries and access to other professionals that may be required to provide the optimal solution.