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Do I need to liquidate my company or business?

A liquidation of the company is a process available in circumstances where a company is unable to pay its debts. The company may have a cash flow issue, it may have no assets, or it may have very few assets. If your company has a cash flow issue, it may be a short or long term issue and there may be alternatives to liquidation. Any alternatives will depend on you company's specific circumstances. Call us now for a no cost obligation discussion or meeting.

My company is being sued and cannot defend or pay, what do I do?

A liquidation of the company is a process available in circumstances where there is an action being commenced or pursued against the company and the company does not have sufficient cash or other asset resources to fund a defence or pay a claim if successful against the company. A liquidation process could bring an end to the proceedings if there is no commercial benefit to the plaintiff in continuing to pursue the claim.

Copy Of -My company is being sued and cannot defend or pay, what do I do?

A liquidation of the company is a process available in circumstances where there is an action being commenced or pursued against the company and the company does not have sufficient cash or other asset resources to fund a defence or pay a claim if successful against the company. A liquidation process could bring an end to the proceedings if there is no commercial benefit to the plaintiff in continuing to pursue the claim.

My company has not lodged tax returns, what should I do ?

If the books and records of the company are available to complete its tax returns, you should attend to their lodgement. If your company has been trading at a loss, there will not be an income tax liability assessed on your company. If your company has been trading profitably, the income tax liability should be assessed. You may wish to consider a liquidation of the company if it is no longer trading and has a liability for income tax that it cannot pay or if the books and records available for completion of outstanding tax returns are inadequate.

My company has not lodged tax returns, what should I do ?

If the books and records of the company are available to complete its tax returns, you should attend to their lodgement. If your company has been trading at a loss, there will not be an income tax liability assessed on your company. If your company has been trading profitably, the income tax liability should be assessed. You may wish to consider a liquidation of the company if it is no longer trading and has a liability for income tax that it cannot pay or if the books and records available for completion of outstanding tax returns are inadequate.

My company has unpaid or unreported superannuation, what should I do?

Superannuation is a compulsory contribution. Your company must report any superannuation contributions to the ATO that have not been reported to super funds by their due date. Your company should also pay the superannuation owed, unless it does not have sufficient funds to pay. If your company has not reported outstanding superannuation and has a superannuation liability that it cannot pay, a liquidation of the company may be warranted, subject to other specific circumstances. A director can be held personally liable for superannuation that remains unreported beyond 3 months from the due date for reporting, or for unpaid superannuation.

My company has outstanding BAS and PAYG reporting or payments, what are my options?

BAS amounts and PAYG withholding should be reported to the ATO if your company has the books and records to substantiate the amounts. A director can be held personally liable for PAYG withholding tax that remains unreported beyond 3 months from the due date for reporting, or for unpaid PAYG withholding tax. If your company has unreported or unpaid BAS amounts or PAYG withholding tax and has no ability to comply with reporting and with payment, a liquidation of the company may be warranted, subject to other specific circumstances.

What happens to creditors' debts if I liquidate?

Once a company is placed into liquidation the claims of creditors are crystallised in the liquidation and become debts of the company that are provable in the liquidation and entitled to rank for a distribution in full or in part if sufficient recoveries are made to enable a return to creditors. If there are no assets and no other recoveries available the creditors' debts are written off at the end of the liquidation.

How do employees get paid in a liquidation?

In a Liquidation, employees are entitled to be paid in priority to all other creditors and in priority to secured creditors like banks from the realisation of a class of assets referred to as floating or circulating assets. These typically are assets that can be converted into cash fairly easily, such as cash at bank, stock and debtors. In the event that a company in liquidation realises no assets to make any distribution to creditors, the government's Fair Entitlements Guarantee (FEG) scheme is administered during the liquidation to ensure employee entitlements (except unpaid superannuation and sick leave) are paid. The FEG scheme provides an advance of monies to a Liquidator for the payment of outstanding employee entitlements.

What are employees’ rights in a liquidation?

Employees are entitled to a priority in payment of what is owed to them ahead of ordinary unsecured creditors in a liquidation of the company. Employees who are owed entitlements are creditors of the company and are entitled to vote at creditors meetings.

Do I have to lodge the company's outstanding tax lodgements if I liquidate?

It is always in the company's interest that outstanding tax lodgements are filed with the ATO. This enables a proper assessment of any liability or credit to be determined. The ATO may raise default assessments if the company fails to lodge, and this could result in liabilities being raised in access of what they actually are. In a liquidation, if there is unlikely to be a return to creditors, the company may not need to lodge its outstanding returns.

Who pays for the cost of a liquidation?

Liquidators are paid for the work they do out of the asset realisations made in the liquidation. Any payment towards a liquidator's fees cannot be made without approval from creditors. A creditors' meeting is convened to obtain creditors' approval. If a liquidator is approached to conduct a liquidation of a company that has no or very few assets that are insufficient to cover a liquidator's initial costs of undertaking the liquidation, a liquidator is likely to request that a director or an associate of the director provide an indemnity payment to cover an amount of the liquidator's initial costs.

How long does a liquidation take?

The length of a liquidation process varies depending on the specific matters to be dealt with in the liquidation. Ideally a low or no asset liquidation should take 6 months to complete and preferably any liquidation should not extend beyond 12 months, unless there are matters existing that prevent the liquidation from being finalised, such as assets that have yet to be realised or litigation that is pending.

Am I liable for unreported or unpaid PAYG or Superannuation if I liquidate?

A director can be held personally liable for superannuation or PAYG withholding tax that remains unreported beyond 3 months from the due date for reporting, or for unpaid superannuation or PAYG withholding tax. There is an automatic penalty on a director (including former directors in certain circumstances) for unreported amounts. The penalty is equivalent to the amount of the liability that should have been reported, and may be subject to penalty interest. Similarly, where amounts remain unpaid for a period of time, the ATO can issue a Director Penalty Notice on a director requiring specific action be taken or be subject to the penalty. If your company has unreported or unpaid amounts, and cannot comply with reporting or payment, liquidation of the company will remit any penalty for unpaid amounts if the liquidation is commenced prior to the expiration of any Director Penalty Notice.

I have received a garnishee against my personal or business bank account, what do I do?

A garnishee is an avenue available to a creditor to secure monies that are owed to the creditor. If your company's bank account that has been garnisheed by a creditor, you need to consider your company's financial position as a whole and whether it is probable that the same creditor or other creditors are likely to pursue further garnishee orders or other recovery action if your company has fallen behind with creditor payments. Subject to your specific circumstances, there are options available to either crystallise creditor claims or place a statutory moratorium on their claims so that they cannot pursue recovery until the business has had a chance to restructure.

Am I liable for my company's debts if I liquidate?

A director and a company a separate legal entities. Where the company has incurred debt, the company is liable for that debt. A director may be held personally liable for company debts under 3 possible circumstances. Firstly, where the director has signed a personal guarantee. Secondly, where the director is subject to an automatic penalty or has received and failed to comply with a Director Penalty Notice from the ATO, the director can be held personally liable for unreported or unpaid superannuation or PAYG withholding tax. Thirdly, where in a liquidation of the company a liquidator or a creditor pursues an action against a director for insolvent trading. Insolvent trading generally is the incurrence of debt during the trading of the business where the director knew, or ought to have known, that the company was not going to be able to pay that debt.

Can creditors sue me if I liquidate my company?

In the 3 circumstances discussed above, a creditor can sue a director for monies owed.

Can I start a new company after liquidation?

A director may start a new company after placing a company into liquidation. A director may be suspended by ASIC from holding the role as director of a company if the director has been a director of 2 or more failed companies in the previous 7 years. Failed companies generally refers to companies that have been placed into liquidation.

How does liquidation affect my credit rating?

As part of any lending criteria, the lender will undertake a credit check on an individual applying for credit. It is not uncommon that the credit check will turn up a result disclosing a company in liquidation or deregistered if the liquidation has been finalised. The liquidation will not have a direct impact on an individual's application for credit, although a lender may request information from the liquidator pertaining to the liquidation which may or may not impact the individual's credit rating.

Can I still borrow money if I liquidate?

A director can still borrow money if they have a company in liquidation. As part of any lending criteria, the lender will undertake a credit check on an individual applying for credit. It is not uncommon that the credit check will turn up a result disclosing a company in liquidation or deregistered if the liquidation has been finalised. The liquidation will not have a direct impact on an individual's application for credit, although a lender may request information from the liquidator pertaining to the liquidation which may or may not impact the individual's borrowing ability.

What happens to my personal assets if I liquidate?

A director and a company are separate legal entities. Where the company has incurred debt, the company is liable for that debt. In a liquidation of the company, a liquidator cannot take possession of a director's personal assets to meet the creditors’ claims in a liquidation. A director's personal assets are only exposed if the director is sued in his or her personal capacity. A director may be held personally liable for company debts under 3 possible circumstances. Firstly, where the director has signed a personal guarantee. Secondly, where the director is subject to an automatic penalty or has received and failed to comply with a Director Penalty Notice from the ATO, the director can be held personally liable for unreported or unpaid superannuation or PAYG withholding tax. Thirdly, where in a liquidation of the company a liquidator or a creditor pursues an action against a director for insolvent trading. Insolvent trading generally is the incurrence of debt during the trading of the business where the director knew, or ought to have known, that the company was not going to be able to pay that debt.

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