Those two words, “corporate insolvency”, contain a wealth of meaning. Corporate insolvency is a tricky situation, involving multiple possible liabilities.
Those two words, “corporate insolvency”, contain a wealth of meaning beyond the threat of debt collection agencies. Corporate insolvency is a tricky situation, involving multiple possible liabilities. If your company has tax liabilities, you can receive a director penalty notice, holding you personally liable for company tax or a garnishee notice, whereby the tax office can access company funds. If your company has creditor liabilities, you can be subject to a company liquidation by creditors.
Corporate insolvency in Australia has another ramification- A company isn’t allowed to trade while insolvent. That can come as a nasty surprise to businesses which were sailing along OK until they did the numbers related to a debt and found out they were technically insolvent. Directors, being liable by statute for the financial administration of their companies, are also liable for compliance with corporate law, as well as tax law.
Defining the help that you need
Corporate insolvency has a few basic scenarios which will illustrate how to define what sort of assistance you require in managing the issues:
- Business debts: These debts include finance, suppliers, services, and similar debts. These are commercial debts, and they’re covered by credit and corporate law. A typical case of insolvency involves a charge for commercial services or credit which takes the company into debt to the point it can’t meet its obligations.
- In cases like these, you’ll need the services of an insolvency practitioner. These expert services can be extremely valuable. The insolvency firm will analyze the debt issues, naturally, but will also check and analyze company accounts. These analyses will also find any cashflow issues and other related problems. The insolvency practitioners will advise on the best course of action for managing the debt, which may involve anything from voluntary administration to a company liquidation, or, in many cases, a quick fix to the debt issues.
- Tax debts: Taxation debts can be managed through a combination of professional tax accountancy and ATO procedural options. The ATO makes every effort to ensure that taxpayers are aware of their rights of appeal, and in the case of garnishee notices will also hear appeals regarding the effects on cashflow of garnishee orders.
- Tax accountants use a variety of methods to manage tax issues, including in some cases helping rework the small business accounting system or other business accounts into a more tax-friendly operation. Most businesses trip over their own accounting practices in relation to tax simply because basic tax entries are either garbled or not included in routine procedures. Whatever else the tax accountants do for you, this service alone is well worth having. The result is that your accounts are “customized” to create both useful documentation of your tax records, and you get a good working system for your business.
- Australian Taxation Office services: The ATO will assist with explaining its procedures and your rights related to any tax assessment and appeals. In cases of hardship or unusual circumstances, there are also options available. You’ll get good advice and straight answers to your questions.
If you’re having any corporate insolvency problems, there’s a lot of help around when you need it. All you need to do is pick up the phone, and you’ll get the answers you need.