In Show 077 – Phase 13 – Insolvency, Winding Up and Bankruptcy originally broadcast on Facebook Live on Wednesday 4 April 2018 we explore this interesting topic.
You can download the worksheet for today’s episode here – 077 Worksheet
On BLL today we discuss Phase 13: Insolvency, Winding Up and Bankruptcy in greater detail. We are going to focus on this phase throughout April of 2018. Terms like insolvency and bankruptcy have a well earned negative connotation but it doesn’t necessarily have to be that way. Winding up a business can be a positive thing. At some point you’re going to exit your business and you need to have a plan in place before that happens.
All companies need to be registered with ASIC in Australia. To end a business you need to deregister it with ASIC so long as the company is still solvent. All the shareholders have to agree to this process and a special resolution has to be approved by the company directors and shareholders. A notice than has to be listed in the local newspaper. A liquidator will be appointed to wind up all the companies outstanding debts. The liquidator will then deregister the company. You have to get good advice from your accountant, your lawyer and a liquidator to make sure all your bases are covered.
Involuntary Winding Up/Insolvency
As the name suggests this occurs when a company gets into some financial difficulty and is no longer able to make its debt obligations. The company is deemed insolvent and a winding up process begins. The company can be wound up by its members or, more likely, by its creditors. Documents have to be filed in the courts. No more transactions can be undertaken by the company after the creditor issues a statutory demand for payment. If you don’t respond within 21 days you are deemed insolvent. If the court agrees with the documents and the correct process has been followed a liquidator is then appointed. Any assets are then sold off in order to pay creditors.
This is similar to insolvency but this time it’s personal. You no longer have the ability to meet all your debts obligations and have to seek protection from your creditors by declaring bankruptcy. This is not something you do at a moments notice. You have to get good advice from an accountant and a lawyer. There are a number of ways that bankruptcy can occur. The first is what’s called a voluntary bankruptcy. After filling out the proper paperwork a bankruptcy trustee will be appointed. The process will take about three years to complete. Involuntary bankruptcy occurs after you’ve failed to respond to a bankruptcy notice within 21 days. A creditor then files a petition with the Federal Court. The court will then appoint a trustee. The debts have to total more than $5000 in order to start this process.
More about this Show
We started Business Legal Lifecycle to create a simple way for you to understand complex legal terms. Most importantly we want to help you to develop a plan to take your business successfully into the future. There’s a startling statistic the underscores the importance of developing a solid plan. The majority of business owners are just seven months away from losing everything. A single aspect of your business that is not set-up correctly can shut down your whole operation very quickly. Legal advice is not cheap and even when you can afford it there is often a divide between lawyers and their clients. We want to close that gap once and for all. We want to put legal knowledge and tools into your hand to prevent the worst from happening to you.
Twice a week we are going to deliver those tools right to your home or office with Business Legal Lifecycle TV. We’ll start the week with Fast Fix Monday, a short 5-10 minute video that will tackle a single issue that businesses have to deal with. Then on Wednesday’s our main show will feature with more fulsome discussions and interviews all delivered in a straightforward and easy to understand format.