Corporate insolvency and business insolvency are pretty grim experiences. If you’re a director of a company and have received a director penalty notice holding you liable for unpaid taxes at the same time the business crashes, you’re also likely to be literally climbing the wall with the various problems that caused this situation. Well, don’t despair- Help is available, and a lot of it.
Insolvency issues- A case study
The issues involved in insolvency need to be understood. Business insolvency is usually the result of a whole series of events. The real problem is that many business owners and company directors simply don’t know their own rights in these cases.
The best way to illustrate these issues is by a case study:
Company C is a relatively new business. It supplies goods and technical services to the retail sector. Company C started to hit trouble when a major client didn’t pay for services, compromising the company’s cashflow. Being a new business, the company didn’t really have the capital or the time to take appropriate legal action to recover debts, and the costs of the action would have been prohibitive relative to the amounts involved.
The inevitable result was that the business was progressively crippled by the outstanding debts. Added to this situation was the fact that the company was somewhat vague about its tax obligations, and didn’t lodge a tax return for its first year of operations. The business owners and company directors were also worried that they didn’t have the cash to pay outstanding taxes.
The business by the end of the second year was drifting badly. The taxation office issued a director penalty notice for the outstanding taxes on the same day that the company drew out its last cash and became effectively insolvent and unable to pay its bills. The company could no longer legally trade under these circumstances, but the directors weren’t aware of that fact.
Ironically, it was the director penalty notice that set the company back on track. The directors called the tax office, explained the problems, and were informed that the tax office could review the notice if given the facts of the case in writing. In the meantime they were also advised to get professional assistance with their business issues.
They took that advice. Company C called in a firm of insolvency practitioners, under the impression that they were totally broke and would need to liquidate the company. The case manager, after some research and checking the company’s books, discovered that the debt owed to the company amounted to far more money than the company needed to pay its tax and other bills.
The insolvency practitioners called in a debt collection agency to deal with the outstanding debt. The entire amount owed was paid remarkably promptly after the first notice from the debt recovery services. The company wasn’t entirely out of the woods, and still needed time to pay the tax owing. The tax office agreed to a progressive payment, set well within the company’s cashflow tolerance.
As you can see- There’s plenty of help around when you need it. All you need to do is ask. If you’re not sure of your rights and entitlements, get professional assistance. You’ll be very glad you did.Google+