CORPORATE INSOLVENCY
A creditor may issue a statutory demand and apply to the Court to appoint a liquidator to an insolvent company. Alternatively, the shareholders of a company may resolve that a company be wound up and that a liquidator be appointed. A liquidator’s role is to investigate the property and affairs of the company. If there are sufficient company assets available, or if monies can be recovered into the company, then a dividend may be paid to creditors.
Individuals are not normally liable for the debts of a company, unless they have executed a guarantee. For this reason, the ability of creditors to recover their debts is often limited to what a liquidator can recover from the assets of the company and from legal proceedings, if any.
The Australian Taxation Office may issues notices to a company’s directors for unpaid withholding tax and superannuation contributions, which the directors may be personally liable for; which require the amounts to be paid, or that an administrator or liquidator be appointed to the company. It is extremely important that if a director become aware of any such notices, they obtain competent advice immediately.
If a company incurs debts while it is insolvent, its liquidator may seek to recover from the people who were the company’s directors when those debts were incurred. A liquidator may also seek to recover other monies, such as where the company’s assets or monies have been disposed of through uncommercial transactions, and where the company has repaid some creditors preferentially over others.
As an alternative to liquidation, a company’s directors may resolve to appoint an administrator, whose role is to investigate the company’s property and affairs, and report to creditors; who vote about whether the company should enter into an arrangement that has been proposed, called a deed of company arrangement, or go into liquidation. Creditors may also vote to end the Administration, although that rarely happens.
A secured creditor may appoint a receiver or manager over a company’s property or business, whose role is to realise that property/business so that the proceeds may be used to pay the secured creditor.
If you are a creditor trying to recover a debt from a company, then you need to know what steps you can take, and information to help you decide whether to incur the costs associated with pursuing the debt.
If you are a director or a shareholder of an insolvent company, then you need advice about the options available to you, and assistance with organising your affairs and the affairs of the company.
Uther Webster & Evans can to provide you with advice and assist you with your commercial and personal affairs.