29 - April 2009
I regret to advise clients, colleagues and friends of the death of our consultant, Tom Carmichael on 26 March 2009.
Tom was a much loved member of this firm and a highly valued colleague.
Tom was a litigator of considerable flair and expertise; a former Registrar and Sheriff of the Supreme Court of Queensland and a Past President of the Central District Law Association. Before joining this firm he was a partner in one of Rockhampton's most respected practices, Messrs South and Geldard.
Tom had many friends as he lived life to the full. He was an honourable man and a credit to this profession. Tom made life in our firm that much brighter; we shall miss his wise counsel and good humour. He will be sadly missed by the many clients who have valued his advice during his many years of practice in Queensland.
Tom leaves his wife, Jenny, his son, Jim and three grandchildren.
The funeral shall take place at 1.30pm on Tuesday 31 March 2009 at St William's Catholic Church, Dawson Parade, Keperra near Brisbane.
This month is an
So if you want to know what liquidators, administrators and receivers get up to and what is the difference then read on.
Don't forget to join me and the Law & Disorder Group on Facebook where you can have your say on these issues and network with other readers.
Insolvent trading. Is everyone at it?
As a director of a large company, despite the embarrassment, you will stop operating rather than risk insolvent trading. To do otherwise is to risk being personally liable.
A director of a small company can usually stand the embarrassment, but with the family home at risk and a 4 wheel drive to support, the temptation is to press on and see how it goes unless someone unsportingly takes the point. In bad times, long term creditors such as banks and landlords do not want to shoot themselves in the foot by being trigger happy. But, if you have an ungrateful supplier who cannot wait for its money, as a director, you may be accused of insolvent trading. But what is it?
A company can take on any liability, it is only when the bill arrives and it cannot pay that a problem arises. A company which cannot pay its debts as and when they become due is insolvent. Once, the company is in this insolvent state and incurs a new debt (continuing debts such as rent and teenage children don’t seem to count) the company is trading insolvently and you as a director may be liable. You may deny that you suspected that the company was insolvent when the debt was incurred. This may work unless it was obvious, for instance, a reasonable director in your position would have suspected.
If sued personally by the liquidator or a creditor, you have basically two defences:
Insolvent trading can be difficult to prove, legally. It is awfully easy to let a few billion slip through, as any bank will tell you.
Paul Brennan is a practicing Queensland lawyer and author of the “10 Greatest Legal Mistakes in Business…and how to avoid them”.
The Eight Stages of Going Broke
If you are one of the many small company owners worrying about going broke and require more painful detail then read on.
Basically, there are 8 Stages:
I hope that this is enough to flesh out your depressing 3am deliberations. If not, speak to your accountant.
Liquidators and the Spanish Inquisition
I think liquidators will not mind me saying that generally they are not very nice.
However, if you are owed a substantial amount of money from someone who is hiding behind a company, you will want to hire someone who can deliver a mini Spanish Inquisition rather than a UN Goodwill Ambassador visit.
Here are 5 things that you the creditor will want the liquidator to achieve:
Find the person responsible behind the company. This is usually a company director who has often headed for the hills. Using their considerable legal powers liquidators can bring the company director to heel.
Conduct an interrogation, using at least mental torture.
Find out where the money is, ignoring any sob stories or pleas for mercy.
Put the debtor’s spouse and their indolent teenage children, including babes in arms out onto the street.
Sell everything so that you get paid in full.
If only the liquidator could end it with a burning at the stake, what creditor would not look up to the heavens and say “Yes, there is a God”.
You will appreciate that only a very special person could live up to these sorts of demands. However, starting with the lawyers and accountants who did so well, as far as dirty work was concerned in the Spanish Inquisition, breeders have developed the modern liquidator, a sort of legalaccountadoodle/Frankenstein who combines legal and accounting skills to try to live up to the often unrealistic demands of creditors.
But liquidators who are so often misunderstood do not always need to be seen as the baddies. A skilled liquidator can reconstruct the ailing company and cause it to rise up, pick up its bed and walk. How often does this happen? Well, they are ahead of undertakers.
The Liquidator I, II, III and IV
Maybe, as it is a little depressing to call in the liquidators and perhaps to make life a little more exciting for these undertakers of the corporate world, liquidators sometimes adopt aliases, such as a generic Insolvency Professionals.
The least imaginative of these aliases is the “Provisional Liquidator”. This is the name given to liquidators who are called in before a winding up order is made. The court does this to preserve the assets if the winding up order may be delayed or if there is a damaging conflict in the company. As the assets are usually long gone, in small business there may not be much call for them.
A more promising role for the liquidator is as “Administrator”. An Administrator is an Insolvency Professional appointed by a company which has decided it may fall on its sword. The Administrator takes over and is allowed a “time out” (“Voluntary Administration”) to try and keep the company going for about a month while keeping the creditors informed (there are creditors meetings near the start and at the end). But after that a creditors meeting can decide that there is no point or alternatively, can come to an arrangement in writing with the company (“A Deed of Company Arrangement”).
Liquidators are often asked to be “Receivers”. For instance, in your mortgage loan document to your bank you will agree that they can appoint a receiver to get their money back if you do something wrong, such as not meeting repayments. They can sell your home which is the security for a loan. Debentures or charges agreed to by companies to secure a loan usually contain a power to appoint a receiver to "sell up" the charged assets. In the role of Receiver, liquidators are not all powerful, so expect them to be a little bit more grumpy.
So it is not all rushing in, taking the money and nailing down the lid. There is a little bit more to it than that.