Company Bankruptcy |
COMPANY Bankruptcy with No Assets
Understanding Bankruptcy and Liquidation
Bankruptcy and liquidation are ways of dealing with debt that can't be repaid.
Bankruptcy only applies to individuals (not companies).
When you become bankrupt, you are declared by law to be unable to pay your debts.
It will get rid of most of your debts and debt collectors will stop contacting you.
Bankruptcy lasts for 3 years and can affect your financial future, so it should be considered as a last resort.
Liquidation only applies to companies.
When a company can't pay its debts and goes into liquidation, it stops operating.
Company assets are sold in an attempt to pay off the debts.
Bankruptcy only applies to individuals (not companies).
When you become bankrupt, you are declared by law to be unable to pay your debts.
It will get rid of most of your debts and debt collectors will stop contacting you.
Bankruptcy lasts for 3 years and can affect your financial future, so it should be considered as a last resort.
Liquidation only applies to companies.
When a company can't pay its debts and goes into liquidation, it stops operating.
Company assets are sold in an attempt to pay off the debts.
Company has No Assets
If the company cannot pay its debts, and you can’t either, a consequence could be that the company goes into liquidation and you may become bankrupt.
It is important to understand what is involved in bankruptcy and liquidation and how they interact.
If you operate a business through a company, the company owns the assets of the business and is liable for any debts incurred. You, as a director or shareholder, are not generally personally liable for the company’s trading debts and other liabilities.
However, banks or suppliers may require you to give a personal guarantee against any unpaid liabilities of the company. The effect of this is that, if the company cannot pay, you can be legally responsible to pay under the guarantee.
In a situation where the business is not doing well, both the company, and you, may come under financial pressure from creditors demanding payment.
Further, if you are a company director and the company has difficulties paying its debts when they are due. If the company continues to trade and incur debts that it can’t pay when they become due, you may become personally liable for those debts; regardless of whether you gave a personal guarantee or not.
It is important to understand what is involved in bankruptcy and liquidation and how they interact.
If you operate a business through a company, the company owns the assets of the business and is liable for any debts incurred. You, as a director or shareholder, are not generally personally liable for the company’s trading debts and other liabilities.
However, banks or suppliers may require you to give a personal guarantee against any unpaid liabilities of the company. The effect of this is that, if the company cannot pay, you can be legally responsible to pay under the guarantee.
In a situation where the business is not doing well, both the company, and you, may come under financial pressure from creditors demanding payment.
Further, if you are a company director and the company has difficulties paying its debts when they are due. If the company continues to trade and incur debts that it can’t pay when they become due, you may become personally liable for those debts; regardless of whether you gave a personal guarantee or not.
You can become bankrupt in one of two ways:
• either by your own choice (voluntarily) and choose your own trustee; or
• as a result of a court ordering that you go bankrupt, on the application of one of your creditors (through a creditor’s petition).
Your company can go into liquidation in one of two ways:
• either by a resolution of the shareholders, by way of a ‘voluntary liquidation’; or
• as a result of a court ordering that your company be wound up; usually based on a creditor’s wind up application filed with the court. This is called a court liquidation. When your company goes into liquidation, a liquidator is appointed. A liquidator is a qualified and registered person responsible for administering the liquidation of your company.
• as a result of a court ordering that you go bankrupt, on the application of one of your creditors (through a creditor’s petition).
Your company can go into liquidation in one of two ways:
• either by a resolution of the shareholders, by way of a ‘voluntary liquidation’; or
• as a result of a court ordering that your company be wound up; usually based on a creditor’s wind up application filed with the court. This is called a court liquidation. When your company goes into liquidation, a liquidator is appointed. A liquidator is a qualified and registered person responsible for administering the liquidation of your company.
If you go Bankrupt, what happens to your Company?
If you become bankrupt, you cannot continue as a company director. Also, any shares you own in the company pass to (or ‘vest’ in) your trustee in bankruptcy. You no longer own the shares. It is up to the trustee as to what action he or she takes concerning any interest you had in the company.
Depending on the circumstances, the trustee may have the company put into liquidation or sell the shares if they think they can realise money to pay creditors of your bankruptcy.
If the trustee does place the company into liquidation, you have an obligation to assist the liquidator and provide information to them about the company’s property, dealings and affairs.
The trustee may decide not to take any action if the company has no assets or there is little or no value in the company. If this occurs, a creditor may apply to court asking that the Court put the company into liquidation and appoint a liquidator.
Depending on the circumstances, the trustee may have the company put into liquidation or sell the shares if they think they can realise money to pay creditors of your bankruptcy.
If the trustee does place the company into liquidation, you have an obligation to assist the liquidator and provide information to them about the company’s property, dealings and affairs.
The trustee may decide not to take any action if the company has no assets or there is little or no value in the company. If this occurs, a creditor may apply to court asking that the Court put the company into liquidation and appoint a liquidator.
If your company goes into liquidation, what happens to your personal liabilities?
If your company is put into liquidation, responsibility for administering the company passes to the liquidator. As a director you must assist the liquidator and provide information to them about the company’s property, dealings and affairs. However, you are no longer in control of the company.
It is up to the liquidator as to how the liquidation proceeds.
Unless you are bankrupt, you will remain liable for your separate personal debts (for example, your personal credit card) and any company debts that you guaranteed. You will remain responsible for any debts that you may owe to the company, for example, to repay a loan received from the company.
The liquidator will investigate the company’s business, property and affairs. This includes determining if any assets exist that are worth recovering for the creditors’ benefit. They will also look to see if a claim exists against you as a director; including for:
• failing to prevent the company from trading and incurring debt while insolvent, and
• breaches of director’s duties.
They will also investigate whether there are any transfers of assets that can be recovered for the creditors’ benefit.
If you do not become bankrupt, the company’s liquidation only resolves the company’s indebtedness to its creditors - it does not resolve your separate personal debts or guarantees.
It is up to the liquidator as to how the liquidation proceeds.
Unless you are bankrupt, you will remain liable for your separate personal debts (for example, your personal credit card) and any company debts that you guaranteed. You will remain responsible for any debts that you may owe to the company, for example, to repay a loan received from the company.
The liquidator will investigate the company’s business, property and affairs. This includes determining if any assets exist that are worth recovering for the creditors’ benefit. They will also look to see if a claim exists against you as a director; including for:
• failing to prevent the company from trading and incurring debt while insolvent, and
• breaches of director’s duties.
They will also investigate whether there are any transfers of assets that can be recovered for the creditors’ benefit.
If you do not become bankrupt, the company’s liquidation only resolves the company’s indebtedness to its creditors - it does not resolve your separate personal debts or guarantees.
How employees are affected by Bankruptcy and Liquidation
If your business has closed due to liquidation or bankruptcy, there may not be enough funds to pay your employees their entitlements.
Under the Fair Entitlements Guarantee, eligible employees may be able to claim certain unpaid entitlements such as wages, leave, and redundancy pay.
Going Bankrupt without Liquidating Company
If your company has no assets and you have personal guarantees, we can assist you in declaring bankruptcy.
We will assist you in;
All this can be done over the telephone, from the comfort of your own home. Please Note: The trustee may decide not to take any action if the company has no assets or there is little or no value in the company. If this occurs, a creditor may apply to court asking that the Court put the company into liquidation and appoint a liquidator. |
START YOUR JOURNEY TO FINANCIAL FREEDOM TODAY!
BOOK a COMPLIMENTARY CONSULTATION
Or Call
1300 942 856
Our professional staff are available for a free consultation, with no obligation on your part!