What is Corporate Insolvency?
Corporate Insolvency is simply where a business can no longer meet its debts or outgoings. This can take many forms, but the common signs of impending trouble are:
- Ongoing losses
- Poor cash flow
- Absence of a business plan
- Incomplete financial records or disorganised internal accounting procedures
- Increasing debt (liabilities greater than assets)
- Problems selling stock or collecting debts
- Unrecoverable loans to associated parties
- Creditors unpaid outside usual terms
- Solicitors’ letters, demands, summonses, judgements or warrants issued against your company
- Suppliers placing your company on cash-on-delivery (COD) terms
- Issuing post-dated cheques or dishonouring cheques
- Overdraft limit reached or defaults on loan or interest payments
- Problems obtaining finance
- Inability to raise funds from shareholders
- Overdue taxes and superannuation liabilities
- Board disputes and director resignations, or loss of management personnel
- Increased level of complaints or queries raised with suppliers
- An expectation that the ‘next’ big job/sale/contract will save the company.
The three most common corporate insolvency procedures are voluntary administration, liquidation and receivership. The personal insolvency procedures that apply to a person, not a company, are bankruptcy and personal insolvency agreements.
If you suspect your company is in financial difficulty, get legal advice as early as possible, as this increases the likelihood of the company surviving. One of the most common reasons for the inability to save a company in financial distress is that professional advice was sought too late.
Effective Legal Solutions provides expert legal advice for businesses facing insolvency; we also provide advice for personal insolvency. To schedule an initial consultation, call 1300 977 546.
What is Bankruptcy?
Bankruptcy is a legal process where you’re declared unable to pay your debts. It can release you from most debts, provide relief and allow you to make a fresh start.
You can enter into voluntary bankruptcy. We refer to this as a debtor’s petition. It’s also possible that someone you owe money to (a creditor) can make you bankrupt through a court process. We refer to this as a creditor’s petition.
Bankruptcy normally lasts for 3 years and 1 day.
Bankruptcy is a last resort and may have a serious impact on you. You need to consider carefully whether declaring bankruptcy is the right step for you as it may affect your ability to get credit, travel overseas or gain some types of employment.
Bankruptcy is just one formal option available under the Bankruptcy Act to manage your debt. Other formal options include 21 day relief and debt agreements. There are also other options available (such as coming to an agreement with your creditors).
Effective Legal Solutions provides expert legal advice for businesses facing Bankruptcy. We understand that clients want the process to be as smooth as possible from start to finish. If you have any questions, or to schedule an initial consultation, call 1300 977 546.