Critical advice for directors with insolvency problems

When a financial, debt or cash flow problems hit a number of things happen. As a director, debt problems make the nerves jangle. Business relationships with suppliers fray at the edges when debts are overdue. So much financial uncertainty makes decision-making difficult. The debt problems make the future look uncertain. You wonder where the needed cash flow to pay debts is going to come from?

Yet nearly every successful company and business has hit a financial cash flow crisis. Survival depends on what is done about it. First, know your options and second, make the right decisions, and you and your business will survive too. Whether the financial crisis is due to lack of cash flow, ATO tax debt, partners dispute, creditor pressure or legal claims, there are solutions. That is where years of crisis management and giving critical advice in surviving financial and debt crises can help. But what is that survival advice and how and where do you get it? And how can you tell if its the right advice to get you through your financial crisis and restore your cash flow?

When you hit financial crisis these are the important things to remember (and it is not the usual ‘use us and everything will be rosy’ advice)

1. If you are a fighter, and most business directors are, fight smart. While it may be possible to continue in business and overcome a financial crisis by coming to some time-payment arrangement with creditors such as the ATO, there are serious risks involved of which you may not be aware (e.g. directors can be made liable for overdue ATO payments under an arrangement, without notice) – get expert advice just in case voluntary administration or liquidation occurs.
2. If your own plan to survive the financial crisis proceeds but you get an unexpected knock, all the sweat and strain of the time- payment arrangement may have been for nothing and the debt crisis is prolonged. Consider all your options and choose the best one. Call us to find out what they are for free. We give free advice to company directors and business owners in cash flow and financial crisis all the time.
3. Don’t just ‘wing it’ on a hope and a prayer relying on a deal or a promise which may or may not eventuate. You cannot know now if a big deal or new finance will work you out of financial crisis. Even if they eventually do, why not use this financial crisis to galvanize you into future-proofing your own and your family’s financial safety.
4. Don’t assume your accountant or lawyer know enough to get you through a financial or debt crisis. They are on your side, but do they know enough about managing financial crisis or the rules of insolvency? Are they ‘street-wise’?
5. Don’t assume that seeking advice from a liquidator will assist you through a financial or debt crisis. Their duty is to CREDITORS not you. They will often use a financial crisis try to rush you into voluntary administration or liquidation (and pick up fees) by alarming you about insolvent trading (read our page entitled As a Director What are my Risks and Potential Exposures). You must prepare yourself and your company business before you take such a step. I have seen too many companies sign up for voluntary administration or liquidation when they were in financial crisis but still actually solvent. The directors and shareholders lost the business and the liquidators fees left nothing for creditors. If you tell a liquidator things, even if they say it’s just between them and you, they are sworn to use that for creditors not you. The usual line then is ‘Oh sorry, but now it is going to be different’ or ‘Sorry but the creditors know about x, y and z so now I will have to sue you’ and it usually comes with the rider, ‘Nothing personal.’
6. Use your gut instinct when choosing an advisor to help manage financial crisis. You probably don’t know a everything there is to know about financial-debt crisis management or insolvency, voluntary administration or liquidation (why should you?), but if you have run a company you probably know people. Use your intuition and get an advisor with experience who will openly declare ‘I work for you and your interests ONLY.’
7. Read this website carefully. It is full of information that could make a real difference in your life. I suggest you next read our page entitled As a Director What are my Risks and Potential Exposures.
8. If the company is liquidated, your conduct as a director and your personal financial exposure may become highly exposed so, if you have any concerns, best to get an expert to check your exposure and fix things just in case voluntary administration or liquidation happens.
9. If the company is not liquidated this is much less likely. (e.g. Rodney Adler would not have gone to gaol if his companies had not become insolvent and entered voluntary administration and liquidation.)
10. Don’t be afraid to call us if your company is in financial crisis. We are here to help and we will give you free advice, we do it all the time