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Volume
66 - May 2012 Going Broke Special
Editor Author of The Law is an Ass...Make Sure it Doesn't Bite Yours!
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. (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?
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 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.
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,
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. Anon (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. JF (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
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.
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