ADVICE ON UNDERSTANDING INSOLVENT TRAINING AND STEPS TO CONSIDER.

If you are having trouble baying your bills on time, take a moment to understand your position, to assess whether you need to act. Your situation could be such that you are trading while insolvent.

The Australian Securities and Investment Commission, ASIC, defines insolvent trading:

An insolvent company is one that is unable to pay all its debts when they fall due for payment.

Yes, the definition is that simple. The test is, can you pay your bills as and when they fall due? You could add a timing element to that - is this failure on-going or truly temporary? By on-going, we suggest three months or more is a good guide.

If your position has not improved or has, in fact, worsened, in three months, we think you need professional advice as to your position.

These are not questions to deny or ignore. Hence, our advice to seek professional advice.

ASIC provides advice on what to do if your company is insolvent:

If your company is insolvent, do not allow it to incur further debt. Unless it is possible to promptly restructure, refinance or obtain equity funding to recapitalise the company, generally, your options are to appoint a voluntary administrator or a liquidator. The three most common insolvency procedures are voluntary administration, liquidation and receivership.

ASIC has plenty to say on insolvent trading, including:

If dishonesty is found to be a factor in insolvent trading, a director may also be subject to criminal charges (which can lead to a fine of up to $220,000 or imprisonment for up to 5 years, or both). Being found guilty of the criminal offence of insolvent trading will also lead to a director’s disqualification.

ASIC has successfully prosecuted directors for allowing companies to incur debts when the company is insolvent, and has sought orders making directors personally liable for company debts. ASIC also runs a program to visit directors, where appropriate, to make them aware of their responsibilities to prevent insolvent trading.

If you think you may be insolvent, reach out to someone you trust for advice and to be by your side as you navigate the challenges - invluding any of our team.