FAQs
- What should I do if my business cannot pay its creditors when due (including PAYG and superannuation)?
- Should I wait to see if my financial situation improves before seeking assistance?
- My financial situation is not that bad, do I need to do anything now?
- What is insolvent trading and should I worry about it?
- Can I be personally liable for company debts to the Australian Taxation Office?
- What is the effect of an ATO Garnishee Notice?
- What is the cost of meeting with R.E. Murphy & Co?
- What will happen if I appoint R.E. Murphy & Co?
- How long will it take to appoint R.E. Murphy & Co?
- Will I lose my house, car or other assets?
- Could I go to jail?
- What will happen if I appoint R.E. Murphy & Co?
1. What should I do if my business cannot pay its creditors when due (including PAYG and superannuation)?
If your company cannot pay its debts as and when they fall due you should meet with R.E. Murphy & Co to discuss your options. It is important to understand that there are often many options available, including those that allow the company to continue to operate and, with the agreement of creditors, avoid liquidation.
2. Should I wait to see if my financial situation improves before seeking assistance?
No. The sooner action is taken the more likely a positive result will be able to be achieved. If creditors are not able to be paid within terms they are more likely to be supportive if a decision to deal with the financial situation is taken as early as possible and before the company, and the position of its creditors, becomes more severe.
3. My financial situation is not that bad, do I need to do anything now?
Yes. Having spoken with R.E. Murphy & Co you are not obligated to take any immediate action, however, you will be much better informed of your options and the likely costs and risks of those options.
4. What is insolvent trading and should I worry about it?
Insolvent trading occurs when a company incurs debts when there are reasonable grounds to suspect that the company will not be able to pay its debts as and when they fall due. The directors of the company may be held personally liable for any unpaid debts incurred during the period that a company is insolvent. Note that the term 'director' in this instance may include persons other than those officially appointed as a director of the company.
5. Can I be personally liable for company debts to the Australian Taxation Office?
Yes. A notice issued by the Australian Taxation Office (ATO) may automatically make the directors personally liable for the tax debts owed by the company. Once issued the only way to avoid personal liability is to have the company wound up (liquidation), an administrator appointed, pay the amount owing or comply with a repayment plan agreed to by ATO within 14 days from the notice being issued. If the repayment plan is not completed, the directors will be automatically personally liable for any shortfall.
It is important to understand that the ATO only has to send the notice under Section 222AOE to the director's personal address as last advised to the Australian Securities and Investments Commission. If the notice is not received or delivery is delayed then directors may become personally liable for the debt before they have any knowledge of the notice. It is therefore imperative that companies seek immediate advice if ever they are unable to meet their obligations to the ATO.
6. What is the effect of an ATO Garnishee Notice?
An ATO Garnishee Notice is a notice which the ATO may issue to a party that owes money to a company. The effect of this notice is that the party must pay the amount owed to the ATO instead of to the company. This can have a devastating effect on the company's cash flow and highlights why professional assistance should be sought if a company is unable to meet its obligations to the ATO.
7. What is the cost of meeting with R.E. Murphy & Co?
We do not charge for initial telephone conversations or meetings to discuss your circumstances and options. Charges only commence once an appointment is proceeding. A schedule of our charges is available upon request.
8. What will happen if I appoint R.E. Murphy & Co?
R.E. Murphy & Co will promptly take control of the assets of the company. If the company is operating a business, its operations will be swiftly assessed and a decision made as to whether the business will continue to trade. The trading of any business is monitored on an ongoing basis. The company's affairs will be investigated and reports will be provided to creditors. More specific information in relation to the circumstances of a particular company and its options may be discussed with R.E. Murphy & Co.
9. How long will it take to appoint R.E. Murphy & Co?
Once a decision to appoint has been made, most appointments can be initiated within an hour. This is subject to R.E. Murphy & Co being satisfied that it should consent to the appointment.
10. Will I lose my house, car or other assets?
The role of a director brings about responsibilities and possible personal claims by parties who have dealt with the company. A claim for insolvent trading is against the directors of a company personally, which puts personal assets at risk. If you have given a personal guarantee to unpaid suppliers your assets are at risk. Assistance should be obtained as soon as possible to ensure that your circumstances will not result in personal losses.
In the event of bankruptcy of an individual, all assets fall under the control of the trustee with the exception of certain minor personal asssets and a motor vehicle with limited equity.
11. Could I go to jail?
Unless you have committed a criminal offence in the operation of the business you will not go to jail. A severe case of insolvent trading may be a criminal offence, accordingly you should seek assistance as soon as there is any reason to suspect that the company may be unable to pay its debts.
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