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Insolvency and bankruptcy are two terms that are often closely associated when talking about debt.

Many people often confuse insolvency and bankruptcy, assuming them to mean the same thing. However, while both words, though similar, essentially mean that a company or person is in serious financial trouble, there are key differences between them.

“Does an individual or company owe you money and you’re finding it difficult to get a hold of someone?”
“Have you been chasing an unpaid invoice only to find out that suddenly the number you are calling has been disconnected?"
“Do you suspect the company you’re dealing with may be in Liquidation?”
“What do you need to do to find out?”

Unfortunately, these are some common questions that some business owners may be asking or issues they may face during the running of their business… if this is you, find out how you register or make a claim in a Bankruptcy or Liquidation.

At What is Liquidation, we commonly hear from directors (business owners) of companies in financial difficulties that they regret that they did not seek professional advice or appointed an Insolvency Practitioner earlier.

So, when is the right time to appoint an Insolvency Practitioner?

When a Liquidator is appointed to a company, they have a duty to collect and realise the company’s assets for the benefit of the Liquidation.

In most cases, these assets are subject to company leases, hire purchases or any other finance agreements that typically contain a personal guarantee by company directors. So, what will happen with leased assets in a Liquidation?

The Pros and Cons of a Members Voluntary Liquidation (MVL) vs. Deregistration (Strike-Off)

In the context of Liquidation and Insolvency, the most familiar type of appointment that comes to mind is the Creditors Voluntary Liquidation (CVL). The stigma associated with liquidations can be severely negative, however not much is known about the conducts of MVLs.

Voluntary Administrations (“VAs”) offer a unique opportunity to rehabilitate company directors who may not be financially savvy or comprehend the intricate knowledge needed to manage their businesses. This opportunity to add value should not be viewed as the scarlet letter of the business world. The number of actively trading businesses, which have increased to 2,121,235 in June 2015 from June 2014, may become undone not of their own volition but of circumstance – including but not limited to under capitalisation, poor management of accounts receivables, industry restructuring or increased competition.

Do you know the difference between working in your business and working on your business?  I remember reading a book a long time ago called ‘The E-Myth Revisited by Michael E Gerber’ and whilst this book has been around for a long time it is still relevant today.

A part of this book is based around a pie maker who makes fantastic pies and decides to start her own business, only to discover that there was more to running a business than just making pies.  There was also ordering, stocktaking, bookkeeping, payroll etc. 

In the end she was so busy working in the business and not on the business that the business suffered and she realised that she needed to go back to what she did best.  Baking fantastic pies.  So she hired staff to do the things that she wasn’t good at, like bookkeeping.

 

I have received a "DPN", do I really need to be concerned?

 

Recently there have been so called experts within the industry raising awareness about directors personal obligations relating to debts incurred by their companies. Some of the self-proclaimed experts have recently been on the receiving end of ATO raids, rightly so as at times their actions could be seen as scare mongering in order to push directors into action for profiteering. Insolvency practitioners on the other hand will aim to educate for the benefit of directors.

First and foremost though, prior to actually facing the tough questions, it is imperative to know the numbers. What are the real assets of the company and what are the real liabilities. Sugar coating things often lead directors into a false sense of security so it really is best to cut through the smoke and mirrors and find out what the real numbers are. Get these numbers from your accountant.

Once the numbers are known, it’s then time to gain some clarity about the questions that are often asked when directors are considering their position.

Whilst the final figures for the Christmas trade aren't out just yet, early indications are that Australian retailers suffered a sluggish start to the peak season but have come home with a bang with fantastic Boxing Day trades. What’s got everyone talking though is the collapse of yet another major Australian Retailer – Dick Smith Electronics (“DSE”). It is noted that over the last 18 months, Australian Retailers have enjoyed some steady improvement in sales growth.

How you bounce back will set you apart!

Important business decisions are made on a daily basis by all companies. Unfortunately everybody makes mistakes and no matter how many good decisions you have made in the past, one catastrophic decision can have a significant impact on your business. The way you bounce back from these mistakes and minimising the risk of making a poor decision is what can set your business apart from the competition.