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Bankruptcies: small business legal questions

Discussion in 'Legal Issues' started by TMNT, 8th Nov, 2015.

  1. TMNT

    TMNT Well-Known Member

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    There is a small consultancy company that i know of

    Basically director/owner. One or two sales ppl and one secretary

    Ive been told that ehat they do is they bankruot the company whilst owing the ato heaps in tax and super. Empty out the sccounts and send it to bankrupt.

    They then resign new lease with landlord and continue trading without interruptuon under a new company. So nobody knows anything has changed whilst getting away eithout paying huge debts etc.etc

    This above situation is also apparently hapening at a nice restaurant i go to wherre the owners are preparing to sell the business while bankrupting it.

    Curious, how is this all done. I thought once a company is bankrupt a director or more needs to legally be responsible too ie bankrupt
     
  2. Kinnon Bell

    Kinnon Bell Finance Broker

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    As far as I know if you are bankrupt you cannot be a director of a company. Not sure what checks are done by ASIC/whoever when applying though.

    If you are caught then there can be a fine and jail time.

    Even though bankrupts eventually become discharged and 'cleared' they stay on the bankruptcy register (NPII) forever and everer.
     
  3. Joshwaaaa

    Joshwaaaa Well-Known Member

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    We got done over for $20k to a business going bust a few years back. Because we were last in a long line of businesses they owed money to we saw zip out of it.

    As an added kick to the guts 6 months down the track the same smug owner was front and center of 2 page article in the paper saying home well company was doing in its field (manufacturing) while so many others were struggling. After some enquiries we found they he closed due to huge debts, the fired up a new business by almost the same name in his wifes name then gone and hired back almost all the same people.
     
  4. pinkboy

    pinkboy Well-Known Member Premium Member

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    It's called 'Phoenix', an illegal tactic to avoid creditors. Seen it done many times, especially in my industry.

    pinkboy
     
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  5. Biz

    Biz Well-Known Member

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    Generally they find someone to be the fall guy and pay them off...it's rife in the building game where a large portion of the companys cost is labour. The head company keeps running and they bankrupt the one holding all the labour.
     
  6. TMNT

    TMNT Well-Known Member

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    Ive read heaps on about bankruptcies years ago. Many people seem to treat it like a get out of jail free card which i guess can be seen as one. Wipe your debts clean and start again

    Moralities aside.
    Ivr just found out that this consuktancy company the boss has bankrupted it 3 times now and leff about 250k oweing to ato at the least . And does this every 7 years or whatever

    I also believe she has used her husbands name in the past.

    So i assume that shed been trading normally. Not paid super and entitlements etc.
    Emptied out the accounts. Declared bankruptcy. Fired the stafff and resigned new lease and carried on.?

    I assune youd have to pay rent as no landlord would resign you.

    I guess each time they bankrupt them selves, she would be credit wise stuffed for years and not allowed to be a director for 7 years
     
  7. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    There are bankruptcies which relate to persons - individuals and then there are liquidations which relate to companies.

    A company going into liquidation doesn't mean the persons behind it are bankrupt. They can go and become a director of another company. Company debts are not owed by the persons behind it, neither the director nor the shareholders are liable. But there are exceptions, unpaid employee super entitlements and employee PAYE tax, in certain situations, the directors can be liable personally. Directors can also be personally liable for the company debts if it is trading insolvent.

    Emptying company bank accounts would be an offence. Any related party transaction could be clawed back.
     
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  8. Elives

    Elives Well-Known Member

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    can you search someones name to find out what companies they are a director off, or if they have been involved in winding up a business / company?
     
  9. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes you can. Costs about $50
     
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  10. Elives

    Elives Well-Known Member

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    the search does both? where could one do this search? ASIC?
     
  11. TMNT

    TMNT Well-Known Member

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    im pretty sure its very easy to empty out moderate amounts of cash, also clawing it back, if theyve already spent it, then you cant get blood from a stone
     
  12. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes you are right. But if they are paying themselves or related entities etc it can be clawed back - especially within 6 months of insolvency. But what happens is they spend it on business expenses, employ family etc.
     
  13. TMNT

    TMNT Well-Known Member

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    im not a bankruoptcy expert but I could think of at least 5 ways to spend cash and make it sound legitmate or grey area

    hire a consultant (consultant being a friend/relative)
    entertainment expenses
    research expenses
    increase the salary of yourself
    travel expenses
     
  14. willair

    willair Well-Known Member Premium Member

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    I think that you may find that's have going on for a while in other area's..

    http://www.tradeunionroyalcommission.gov.au/Hearings/Pages/default.aspx
     
  15. Moist

    Moist Well-Known Member

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    Is it that simple that they can just go ahead and become a director of another company, while their original company still owes/owed money to creditors?
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Yes. it is that simple. Unless a person is unqualified to be a director they can become a director of other companies. Only those who lack capacity, are bankrupt or a banned by ASIC, or convicted of fraud, cannot become directors (and maybe a few other instances).
     
  17. Scott No Mates

    Scott No Mates Well-Known Member

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    No qualification necessary but it important not to be disqualified.
     
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  18. Moist

    Moist Well-Known Member

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    What happens to the outstanding debt of the original company?
     
  19. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    The company still owes it. Not the director.
     
  20. Moist

    Moist Well-Known Member

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    But the company is liquidated....so is the debt just forgiven? Are there any lenders who would give a loan to a company without taking a personal guarantee from the director?

    Won't the company liquidation be recorded on the directors' credit file as a 'black mark' if the company is placed into administration or is subject to a creditors' wind up?