I'm owed money from the sale of a business several years ago. Quite a lot of money. The sale price included terms for vendor finance for about 40% of the total. Terms were interest rates the same as the bank's commercial rates (8.27%) with ten year P&I. The lease covers renewal terms well past the end of this time. Repayments were going well for about two years. They started getting late but for nearly 12 months they have stopped completely. The owner (who has a lot of experience in this business, and can run it a lot better than me) has said that the market has dropped- I've confirmed this. I have been in touch with him periodically. $5k per month for 12 months is a big hole in my income- especially as this was supposed to be my survival money while I worked in my startup. Rents provide some income, but not enough to cover expenses. The loan is to a company, probably with a trust involved. The loan however has been secured by personal guarantee. My understanding is that he is trying to sell this and a couple of other similar businesses, but that he won't get anywhere near the price he paid for them. Banks hold the other part of the finance for the business, of course, they get first priority over me. The latest I have been told is that he is "seeking advice". This worried me as it may well be a step towards bankruptcy. I did offer him a $50k discount to settle the amount before June, but apart from acknowledgement of the offer, there has been no move in this direction. The solicitor who drew up the contract tells me that a barrister will be needed from the word go to pursue legal action. I'm not sure why. I know that he has substantial property assets in his super fund but presumably these are inviolable. I'm not sure what assets he has in his personal name, but considering his strong financial background (MBA) there's probably not much. So I don't know if it's worth while suing, or if this is a "blood out of a stone" situation.
Why not try debt collection route rather than legal route? As an example, Haven't used these guys but seen some of their material and seems ok. Collectmore Debt Solutions Pty Ltd - Collectmore Debt Solutions Pty Ltd
That may well be worth a shot. However I have an image of only collecting 10c in the dollar. Those rates seem quite reasonable. Probably less than legal action involving a silk.
That sucks Geoff. What a kick in the backside for you. I can't help with advice but I hope you get your money.
If they do go into administration your quite right it will be secured creditors that get the first bite of the cherry unfortunately. I doubt the SMSF could be attacked? Terryw should be able to help here Sorry to hear this, stressful time.
Depending on the size of the monies owed, a barrister may be required to provide specialist advice early so that you know your options. You wouldn't brief a silk, just a barrister who's experienced in the equity division. An advice would be around $2,000 I would think. If the debt is sizeable and the debtor has assets, I don't see why you wouldn't consider this avenue.
@geoffw - Sorry to hear about the situation. If it has been 12months without payment, and really no attempt I think you need to seek your own advice and promptly. You are essentially unsecured at this point in time. Do you have any 'hard' security? Mortgage, caveate etc over real property? Was there a charge over the company/trust at all (fixed and floating charge?). If they do sell the business - how can you ensure you will recover your debt? I would be wary/cautious of providing any discounts/offers, accepted or not, they may be seen as binding. There are steps you need to take in order to recover debts, esspecially if they are substantial. The earlier you act in order to secure your position the better. You are far better off acting early, and trying to gain some security - rather than trying to do it once they are in administration. Given the position you may be able to strengthen your security through negotiation now. Maybe an initial consultation with a barister is a good option. Also hunt down advice from the banks 'panel solicitors'. These are the ones who write the loan and security documents for the commercial sector of the banks. Not sure which state you are in but Minter Ellisons would be a good start. They specialise in securing a banks position - so a discussion with them may be a good start. Lavan Legal (in WA) are also a good option. A couple of grand now, may protect a whole lot more than that later on. Best of luck Blacky
Geoff, I can't really offer any advice on this matter, but I do wish you every success in securing what is rightfully yours.
Yes, did you take any security for your loan - person property security act charge perhaps? If not then you would be an unsecured creditor and there may not be much left after security creditors take their share. You should start trying to find out what person assets he owns in his own name. If he has some then it may be worth going for it.
As a unsecured creditor you may hold sufficient power to seek liquidation to enforce the debt and also through the guarantee. A friendly liquidator appointed by you then may sell you the residual business on favoured terms v's on market. (Assume the business has zero value to a third party but enhanced value to you). You should seek legal advice. Dont make offers to discount anything - It can be used against you.
Thanks for the info. There was no security other than the personal guarantee. The discount has already been given- and that was in exchange for settling the entire loan by June 30, vs continuing the arrangements for another 6 years. I have arranged an appointment with a debt collector, who is also a qualified lawyer. I am also trying to arrange an appointment with my solicitor, though I'm sensing the glee. Like a contested divorce. We'll see how it goes from there.
Sorry to hear - these situations rarely improve with time. Need to act swiftly to salvage whatever you can.
best wishes @geoffw . I echo some of the sentiments above, you need to get quality legal advice on the specific situation, dont skimp on this as the right advice, preferably from a lawyer able to balance the legal rights with commercially viable, practical options. you also need to act swiftly, there's every chance he's still keeping up with payments to the bank and so you could get in first and go after his personal assets. does your agreement with him give you the right to lodge a caveat over any of his assets? what about going in and either taking possession of the business or flogging off whatever you can sell? I've seen situations where the mere real threat of you moving forward on action and a realisation of the potential snowball effect has been enough for someone to fork out the money. eg if you start action the bank might be alerted and they could make things more difficult for him too. is his wife on the docs too? often a spouse who doesn't have anything to do with the actual running of the business but sees they're name on a claim will start panicking and will put pressure on the other spouse to resolve it. as it stands atm you're way down the list of priorities for him, after bank, rent, staff, any other related expenses, probably household expenses, car expenses, anything else lifestyle related because so far he's seen that nothing happens if he doesn't pay. you need to make yourself top of that list or at least close to it. you're likely to still have options but in these sort of situations they tend to get smaller every day, especially if the businesses are losing money since it means his personal asset pool is probably shrinking every day to support the losses.
Randomly show up at his house. I've found people often pay up when you start to make it a but too personal
true, but any action from here on should be done after geoff knows his exact position legally and what his options and odds of getting the money are.
Subject to your legal advice, it may be worthwhile issuing a statuary demand for payment. I think from memory this gives him 21 days to pay or refute the debt. If he ignores this demand he is deemed insolvent and wind up proceeding can be commenced. That stat demand is cost effective, the wind up proceedings are not.. But if he's keeping up with his bank payments and other secured creditors. The last thing he'd want is any wind up proceedings initiated against him. As all creditors would be alerted and thus will bring his whole structure down. This action should definitely put you near the top of his priorities.
Statutory demands can work, but if he cannot pay then he may just go belly up. So it may be worth considering whether to wait a bit longer. Going now or later depends on the situation. Geoff you may be able to go after your lawyer. He probably didn't advise you well on this - no security for the loan and you could have possibly had some sort of instalment contract so that you retained title until the final payment. lawyers have insurance for this sort of thing.
