HELP!! Implications of putting your company into administration

Hi everyone,

I'm in a very tough situation.

I buy property in a discretionary trust and operate a business through a separate discretionary trust. Unfortunately, due to increased competition, my business which operates through a corporate trustee, is looking to fall into insolvency.

I really need to know what the implications are in terms of future finance depending on what I do from here.

1. If I, as the director of the business, decide to put the company into voluntary administration, and then it in turn falls into liquidation, will this impact on my credit file as an individual? and as a director of any other company?

How will this route affect my ability to obtain finance in both a personal and business ( through a trust) capacity?


2. If I try to ride it out and end up defaulting, I would risk falling into insolvent trading, and potentially be liable as a director to creditors etc. Will defaulting/ insolvent trading be worse than placing the company into voluntary administration before it become insolvent?


Thank you.

 

Most credit disclosures ask if you have been wound up by creditors or put into administration. The brokers can advise the actual impact.

Also sorry to hear things are not going so well

 

Thanks for the reply. Just to clarify, do credit disclosures ask if 'you' as an individual or as a director have been wound up? I read an article:

http://www.smartcompany.com.au/fina...a-director-not-as-bad-as-you-might-think.html

that claims that it will only affect your credit file and ability to obtain finance in a director/ business capacity.....

 

1. This will be on your credit file for 5 years. It will also affect licencing for 10 years - mortgage broking, financial planning etc

2. Yes.

Can't you just wind up the company instead? Or are there debts you want to avoid?

 

I'm not quite sure I understand the difference between winding up and liquidation. Is there a difference?

By winding up, are you referring to a 'members' voluntary winding up'? Is this the same as placing the company into voluntary administration?

 

Do you owe money to anyone or just not making any money?

 

The major strain is the business, which was 100% financed, so yes repayments on the business loan are through the roof.

 

Where there are no unpaid debts one or more of the members can just apply to ASIC to wind up the company. No liquidator appointed. No blemish.

 

I imagine there is a personal guarantee given by someone - probably all directors.

 

Yes, the bank required a personal guarantee for the business loan.

Is it that simple just to wind it up? It is a franchise business by the way. What will happen to the business itself? Who will wind it up? Who will sell it off? and will it be a fire sale price or will I as the director have a say? Will the business continue to trade while it is advertised to be sold?

 

Very simple to wind up. But if there is debt then you cannot wind it up without paying the debt first.

You should also read your franchise agreement.

 

There is debt, that's why I'm struggling. It was financed 100%. Does this mean I cannot voluntarily wind up?

 

There could also be fees if you default on the franchise agreement. Definitely need to read your franchise agreement in full.

 

Not while there is debt..

 

sorry to hear this.
Is there any possibility of selling personal assets to pay back creditors?

MTR

 

All my properties except for one, are in a separate discretionary trust.....so hopefully they are protected?

I, as an individual, am basically worth very little.... I have a house that is currently being built in my personal name. I don't think it would be saleable at this stage. There is only about $35k in equity in there.

 

Sounds like you have assets and equity to fall back on. Sometimes it's better to take the hit and pay off your liabilities in order to maintain flexibility for the future.

 

Depends on
- how it was set up
- type and structure of the trust
- how it was conducted

 

What??? we set up a family trust to protect our assets prepared by our accountant.

How can you get it wrong?

Mtr

 

Some people think discretionary trust = asset protection, especially accountants. But there are plenty of ways to attack trust assets such as
- constructive trust arguments
- resulting trust arguments
- undermarket value transfers
- sham
- losing control of trustee
- losing control of appointor
- breach trustee duties
- breach trustee power
- invalid decsions
- removal of trustee
etc

Ask your accountant to explain these!