Whether you’re a director of a struggling company or a business looking to recover debts from an insolvent company, navigating the complex landscape of insolvency and bankruptcy can be daunting. Our team of insolvency specialists is here to guide you through every step.

For directors: when your company is struggling

What you need to do if you receive a statutory demand

A creditor will send you a statutory demand if it thinks your company isn’t going to be able to pay its bills. For example, the ATO will often send statutory demands to companies that are late in paying their taxes.

Don’t ignore a statutory demand. If you don’t comply or come to an arrangement within 21 days, your creditor can make an application to wind up your company.

And if their application is successful, your company will be taken out of your hands. Without control of your company, your options for getting back on track or minimising personal liability are reduced.

That’s why — whether you’ve just received a statutory demand, or you’ve failed to comply with one — it’s crucial to get expert legal advice now. By getting legal advice from a lawyer who specialises in insolvency, you’ll have best chance of keeping the most options open.

If you’re facing insolvency you need to know this

The law is there to help creditors to get their money back. So, even if the insolvency isn’t your fault, that often won’t be taken into consideration or count in your favour. What’s more, directors who are found to have been running companies that trade while insolvent face some serious potential consequences.

Maybe you’ve already tried to sort things out yourself in good faith. With employees and family relying on you, it can seem like a good idea to try to keep on trading to get things back on track.

But what can you do if your situation doesn’t improve and you’re then served with a statutory demand with 21 days to comply?

Protecting yourself if you may be the director of an insolvent company

Trading while insolvent occurs when a company keeps trading and incurring expenses after the point its directors knew (or should have known) the company couldn’t pay its bills.

The risks of insolvent trading are not limited to claims being made by a liquidator. A creditor can also take direct action against a director of a company in relation to insolvent trading in certain circumstances.

Insolvent trading opens up tough potential consequences for directors including:

• personal liability for the company’s debts —this means your family home or other personal investments could be on the line (even if they’re in your partner’s name)
• preventing you from being a director of another company
• bankruptcy, which can affect many aspects of your life

You can protect yourself from these severe consequences for directors of insolvent companies if you get the right legal advice early enough. Choose a lawyer who specialises in insolvency because they will have the right experience to defend a claim against you.

For creditors: When you’re owed money by a struggling company

Why legal advice is crucial

If you’re a creditor, you’re on the other side of the coin. You’ve got money tied up in a company that’s showing signs of insolvency. The clock is ticking, and you need to know your options. That’s where we come in. Our team can help you navigate the legal maze to recover what’s rightfully yours.

Initiating legal action

There are a number of ways to take legal action against another company. Our team of experienced litigators will advise you on the best course of action to take.

What happens when you file a statutory demand

Just like an insolvent company can receive a statutory demand, you as a creditor have the right to serve a statutory demand. We’ll walk you through the process, from issuing the demand to what happens if it goes ignored.

Protecting your interests in liquidation scenarios

If the company you’re pursuing goes into liquidation, you’ll want to know how to get back as much of your money as possible. As a team that specialises in litigation, we’ll guide you through the liquidation process, helping you understand how assets are divided among creditors and what you can do to maximise your recovery.

Disputing an unfair preference claim after you’ve been paid

Another scenario your company might face is if you’ve been paid by a company and a liquidator is appointed afterwards.

If a liquidator has been appointed to one of your customers, you may receive an “unfair preference” claim asking you to return money your customer has paid you.

You’ve done the work and been paid by your customer. So, why is a liquidator now asking you to give this hard-earned money back?

What is an unfair preference?

When a company becomes insolvent, its assets can be liquidated. All the company’s assets are sold and turned into cash to repay creditors. But because the company has gone through a difficult time, there isn’t usually enough cash from the asset sales to fully repay everyone that’s owed.

If you were paid after the company became insolvent, a liquidator could potentially legally get the money back from you. They’re not claiming that you weren’t owed the money, the claim is that you were “unfairly” paid before other creditors.

Do I have to repay the money to the liquidator?

There are defences to a claim of unfair preference. But it’s best to get legal advice that’s specific to your situation before the liquidator is successful in getting money back from you. If you have already repaid the money, it will go into a shared pool and you’re likely to get back less than you’ve repaid into that shared pool.

Can We Help?

Our team of lawyers have experience working on complex disputes involving insolvent companies, liquidations, and other forms of commercial litigation.

As insolvency specialists, we offer tailored advice for directors facing complex issues like unfair preference claims. We also guide creditors through the process of debt recovery to put you in the best possible position to recover the money your company is owed.

Give us a call to talk about your situation on 1300 286 578.