Or you may be owed money, goods or services by another business. Whatever your situation, financial issues can have a significant impact on your business, your personal life and your wellbeing.
Insolvent trading is against the law. A company must not continue to trade and incur new debts if it can’t pay existing debts. If it does, the directors may face significant penalties, including being personally responsible for the company’s debts and, in the worst-case scenario, fines or imprisonment. If a company is insolvent, there are various options available.
Voluntary administration
The company directors appoint an administrator to try and salvage its financial position. This may include negotiating with creditors and working out how to reduce the debt.
Voluntary liquidation of a company
The directors or shareholders decide to bring the company to an end by distributing any assets and finalising its affairs, including payment of creditors where possible.
Winding up
The creditors apply to a court to finalise the company. Often this happens after a creditor makes a formal demand for payment of debts. If the formal demand isn’t paid, a company is deemed insolvent and liable to be wound up by Court order. If a company is wound up, a court will appoint a liquidator to collect and distribute any assets and pay creditors (if possible).
If you’re concerned that your company is insolvent, or if you are owed money, goods or services by a company that you suspect is insolvent, contact us for an interview. In many cases, we’ve been able to help our clients keep their businesses or recover money, even when the situation has appeared unsalvageable.
A debt is money that is owed by one party (the debtor) to another (the creditor). It usually arises when there is a deferred payment system in place, for example, an invoice for services, with payment terms of 14 days. Another example is the use of a credit card. The main feature is that there’s a legal obligation on the debtor to pay the creditor.
Debts can arise in all sorts of personal and commercial circumstances.
When a debtor doesn’t pay the debt, the creditor may use debt collection to recover the money. They may engage a debt collection agency to do this.
If debt collection fails, the creditor may take legal action to recover the debt. Subject to a few exceptions, a creditor has six years from the date of the debt to sue the debtor.
If a creditor is pursuing you for payment of a debt and you need legal assistance, contact us to find out how we can help. If you need debt recovery services or want to take legal action to recover a debt, we can help you sort it out.
In Australia, insolvency refers to a company, business or person that is unable to repay debts on time.
A person can become a bankrupt voluntarily, or a creditor can apply to have a person declared bankrupt. A bankruptcy declaration usually has a lifetime of three years.
If you’re a debtor, it’s important to be aware of the consequences of being declared bankrupt. For example:
There may be a suitable alternative to bankruptcy that we could advise on.
If you’re a creditor, contact us to discuss whether a bankruptcy declaration will help you recover the debt owing to you.
We have outstanding experience in debt collection and insolvency, acting for both creditors and debtors.
We can help you recover your financial position, or help you find your way through the difficult times.
In cases of insolvency, there are two types of creditors:
Secured creditors hold a security interest over land, business or other assets. A mortgage is a security interest, so banks and other lenders are often secured creditors. These types of debts are registered as charges against the business so that in the event of liquidation of assets, the secured creditor is first in line to recover the debt. Or if there’s a default on debt repayments, the secured creditor can take possession of the asset over which they have security, for example, repossession of real estate.
Unsecured creditors have no security interest over the business. They’re often consumers who have paid in full for goods or services yet to be delivered, or those who have paid deposits or bought gift cards or vouchers. They may be providers who are awaiting payment from the debtor, or they may have made unsecured loans to the company (for example, loans from the business operators’ family or friends).
Unsecured creditors tend to have fewer payment guarantees than secured creditors, due to the debt being unsecured. If you’re an unsecured creditor and are concerned about whether you’ll be paid, contact us for urgent legal assistance.