Volume 66 - May 2012
Legal cartoon, john fytit, Paul Brennan

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Going Broke Special

  • In 2009 we gave advice on being pursued by your creditors and insolvent trading.
  • Advice for lawyers who are put out to pasture.
  • Another opportunity to download our five free gifts for lawyers.


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Paul Brennan


Author of The Law is an Ass...Make Sure it Doesn't Bite Yours!


101 reasons to kill all the lawyers




The Eight Stages of Going Broke


legal cartoon, courts, Paul BrennanIf 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:

  •  A long period when you drive your creditors mad by not communicating with them or giving repeated failed promises to pay. Creditors are generally very gullible people who will swallow hard luck stories and promises to pay as well as accepting minimal payments. Often, it is only when you stop communicating or tell them to get lost that they “spit the dummy”.
  • A notice giving you 21 days to pay up (“a statutory demand”).
  • Court proceedings which immediately freeze your bank account.
  • From there it can all be over in a month or so, with a court order winding up the company and appointing a liquidator.  
  • Directors hand over the books and assets, fill out a questionnaire and then stand aside. 
  • The liquidator can sue people to recover money or property which has disappeared in dodgy dealings. “Dodgy Dealings” are the sort of things that you would think about doing if you had a company which was going bust.  For instance, repaying your mates, not repaying the creditor that sued you, selling assets off cheap, putting assets in the name of your brother in law, saying that company money is a loan and generally defrauding creditors.
  • The money recovered pays the liquidator’s fee, then the legal costs of the creditor who took the court action and so on. Traditionally there is usually not much left, if anything.
  •  The company is de-registered and it is all over.

I hope that this is enough to flesh out your depressing 3am deliberations.  If not, speak to your accountant.

(c) Paul Brennan 2009. All rights reserved.

This article was first published in the Law & Disorder eZine in 2009.

If you have a legal problem speak to your lawyer

Insolvent trading. Is everyone at it?


Legal cartoon, judge, Paul BrennanAs 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 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:

  • You could not stop the new debts being incurred e.g. you were too ill; or 
  • You tried to stop the company trading but failed e.g. your spouse’s spending was out of control. 

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 ofthe audio CD (with eBook embedded) “10 Greatest Legal Mistakes in Business…and how to avoid them”.

Click here for books, eBooks and CDs by Paul Brennan.

(c) Paul Brennan 2009. All rights reserved.

This article was first published in the Law & Disorder eZine in 2009.

Being put out to grass

Dear John,

Legal gift, rainmaker's mug, Paul Brenna

After 25 years and several mergers I have found myself a partner at a large law firm which has decided to put me out to grass, a little bit like Logan’s Run. They have done so in a kindly, strategic manner and have given me an extremely generous severance package. I feel obliged to take it and go quietly rather than going legal.


(name and firm withheld)

Dear Anon,

Except for sexual harassment, which at your age is understandably not an issue, getting legal is too predictable.

There is a true story about an old miser in a small village in Germany who was very unpopular. When he died he left a will which gave generously to every single person in the village.  The will provided funds for a wake to which all the villagers were invited, the deceased was to be dressed in his best suit and laid out on his bed so that the villagers could pay their last respects.

The villagers went to his cottage, trooped up the stairs and stood around his bed. Just as someone had started to say he wasn’t so bad after all, there was a loud crash, the floorboards gave way and several villagers were killed.

The old miser had sawn away the joists underneath the floor boards.

Not only does this illustrate just one of the many advantages of having a will, it shows that revenge can be a coping mechanism for stressful situations.

After 25 years, you will have a corner (hopefully upstairs) office, coveted by every other lawyer in the firm. Immediately, after your departure they will all rush to your office to lay their respective claims……

Going gentle into that goodnight may be your most sensible option, but it is not your only option.


(c) Paul Brennan 2011. All rights reserved. Extract from John Fytit’s International Legal Problem Page. For more go to https://www.lawanddisorder.com.au/legaladvicepage.html

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Room to let in offices of Brennans solicitors. Call Eleanor Ross on 5475 0285 or email :eleanor.ross@raywhite.com  Ray White Commercial at Maroochydore. Click here for further details.


Disclaimer: The content of the Law & Disorder eZine is to give you legal basics and in some instances, included unashamedly to try and make you laugh.  In law, it is sometimes difficult to work out what is serious and what is just for fun.  Therefore, if you plan to do anything legal, rely on your own lawyer’s advice or instruct me to look at the particular facts of your case.  Not only will I deny responsibility for the legal content but also for some of the jokes.


In this Issue
The Eight Stages of Going Broke

Insolvent trading

Being put out to grass

5 Free things to download


Forward to a Colleague


The Law & Disorder eZine attempts to provide legal information in an entertaining and amusing manner to help clients avoid predictable legal issues.


Alice Brennan

Kathleen Brennan

Brief Books

PO Box 27
Queensland 4557

brief books, Paul Brennan

QLD BN22069914

Phone: 07 5438 8199

Fax: 07 5438 8836



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