INSOLVENT TRADING

Don’t Risk Personal Liability, Get Expert Advice.

Protect Yourself and Get Expert Advice on Insolvent Trading. Facing financial uncertainty in your business can be daunting, but understanding your obligations and options is the key to making informed decisions. Let’s steer your business back towards safe shores together.

INSOLVENT TRADING

Don’t Risk Personal Liability, Get Expert Advice.

Our primary focus is exploring turnaround solutions to keep your business operating. However, if we determine that closure is the best option, we’ll guide you through the liquidation process.

AVA ADVISORY

About your recovery partner. 

Protect Yourself and Get Expert Advice on Insolvent Trading. Facing financial uncertainty in your business can be daunting, but understanding your obligations and options is the key to making informed decisions. Let’s steer your business back towards safe shores together.

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Insights and Expertise

Our team is made up of individuals who have held directorial position.

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Strategic Planning

AVA excels in conducting thorough financial assessments.

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Transparent Communication

AVA places a strong emphasis on transparent communication and stakeholder empowerment.

INSOLVENT TRADING LAWS AUSTRALIA

What is Insolvent Trading? 

Insolvent trading occurs when a company continues to incur debt at a time when it is unable to pay its debts as they fall due. In Australia, this isn’t just a financial risk; it’s a legal matter that can have severe and serious consequences for company directors. It’s like sailing in stormy weather without a life jacket – risky and potentially hazardous.

Australian laws require that you, as a business owner, cease trading if your company is insolvent to protect creditors from further losses (Directors’ Duties as per s588G of the Corporations Act 2001 (Cth)). Recognising the signs early can be the difference between recovery and going under.

Trading while insolvent is unlawful under the Corporations Act. It can lead to personal liability and penalties for directors if debts are incurred during insolvency without taking steps to resolve this. Early advice is critical.

Understanding the intricacies of Insolvent Trading is crucial, and it’s definitely not easy or straightforward either (definitions of solvency and insolvency are found in s95A of the Corporations Act). It’s not always about being completely out of funds. Sometimes it’s about cash flow timing or being over-leveraged with insufficient assets to cover liabilities.

If you’re feeling the crunch and are worried about the solvency of your business, it’s time to take a closer look at your business and its financial landscape with a professional, and assess whether you’re heading into the red zone of Insolvent Trading. AVA Advisory provides expert insolvency advice for directors – book an obligation-free, cost-free consultation online or call 1300 181 220 today.

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HOW WE HELP

Before being appointed, we always provide a clear picture of what options your business may have.

Solving the right problems at the right time can be the difference between a business surviving or failing.

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Personal Liability

Personal Liability is where a company’s debt is made to be the directors personal debt.

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Possible Penalties

These include disqualification, fines up to $200,000, and may lead to criminal prosecution.

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Creditor Action

Creditors can only take action against directors for their own debts whereas a liquidator can on behalf of all creditors.

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Holding Company

A holding company can also be liable for the debts of a subsidiary if it allows the subsidiary to trade while insolvent.

CONSEQUENCES OF INSOLVENT TRADING

Impact of Insolvent Trading on Small and Medium Business Owners. 

For business owners, the ramifications of Insolvent Trading can be far-reaching. Personal liability looms large, meaning directors can be held responsible for the debts incurred by the business during the period of insolvency. This could sink your business and threaten your financial security (like losing your family home).

Serious consequences can arise from Insolvent Trading and can affect both the company and its directors personally, including:

> Civil Penalties for Directors: If a company is found to have been trading while insolvent, directors can face civil penalties. The Australian Securities and Investments Commission (ASIC) (see ASIC Regulatory Guide RG 217) may seek orders from the court for compensation payments to be made by the directors to the company for the benefit of creditors. Additionally, fines up to $200,000 per breach may be imposed on the directors under the Corporations Act.

> Criminal Charges: In cases where dishonesty is a factor in Insolvent Trading, directors may face criminal charges. This is particularly the case if it can be proven that the directors were knowingly involved in the company incurring debts when there were reasonable grounds to suspect insolvency. Convictions can lead to imprisonment and fines.

> Disqualification from Managing Corporations: Directors who have been found to engage in Insolvent Trading can be disqualified from managing corporations in the future. This disqualification is potentially a long-term consequence that can affect a person’s ability to conduct business.

> Personal Liability: Directors can be held personally liable for the company’s debts from when it became insolvent to when it ceased trading. This means that directors’ personal assets are at risk of being used to satisfy the company’s debts.

> Compulsory Winding-Up: The company may be placed into compulsory liquidation if a court determines that it is insolvent and has been trading insolvently. The court may order this on the application of a creditor, ASIC, or, in some cases, the company itself.

>Director’s Indemnity Insurance: It’s worth noting that director’s indemnity insurance may not cover Insolvent Trading, exposing directors to the full financial and legal ramifications.

>Adverse Effects on Credit Rating: A history of Insolvent Trading can negatively impact the credit rating of both the company and its directors, making it more difficult to obtain finance in the future.

>Recovery Actions by Liquidators: If a company goes into liquidation, the appointed liquidator has the power to take recovery actions against directors for Insolvent Trading. This may include clawing back payments made to directors or related parties at creditors’ expense before the insolvency is declared.

Beyond legal consequences, there’s a huge and heavy personal toll that comes with facing Insolvent Trading. The stress and worry can feel like a heavy anchor, dragging down your well-being and focus. But it’s not all doom and gloom – with the right guidance, you can chart a course through troubled waters. Proactive steps and early intervention might help you avoid the storm of Insolvent Trading altogether, safeguarding your hard work and legacy.

Contact the Insolvent Trading advice experts at AVA Advisory today at 1300 181 220 or Book an obligation-free, cost-free consultation.

REVIVING BUSINESS, IGNITING GROWTH

Don’t wait before it’s too late. Address problems early before they escalate.

AVA Advisory provides clear guidance on Insolvent Trading  risks and resolution strategies  tailored to your situation. With the right advice, directors can avoid  personal liability and find the best path forward. Seek expert advice on your Directors Duties and options if you think you are trading while insolvent.

Connect with  AVA Advisory today for a lifeline . Let’s work together to claim the financial storm of uncertainty around Insolvent Trading and set all towards a brighter future  for you and your business. Don’t delay’- let us help you get through it all , not just for your  sake –  but also  for those  you care about the most. Book an obligation-free, cost -free consultation or call 1300 181 220 to discuss your options in confidence. 

Get in touch.

Now, Let’s Start Mapping Your Path to Financial Freedom.

Don’t wait – the earlier we start, the more debt relief options will be available. Contact us today on 1300 181 220 for an obligation-free, cost-free consultation. Share details of your situation and concerns in confidence.

With expertise on your side helping analyse business debt relief options, ATO debt advice, and negotiate agreements, you can look forward again. Clarity, relief, and a brighter future for you and your business are only a few steps away – fill out the form below for your free consultation.