Often a company is issued with official documentation in the form of Statutory demands, Winding Up notices and sometimes the Director of a company may even receive a Directors penalty Notice from the Taxation office. Read on to find out what these notices mean to you.
What is a Statutory Demand?
A Statutory Demand is a demand made under 459E of the Corporations Act. This is a document requiring a Debtor Company to pay a specified sum of money within 21 days from the date of the delivery of the demand. It is not issued by the courts but can have serious consequences if left unattended. What happens if I ignore it? Failure to comply with a Statutory Demand or apply to the Court to set it aside, will result in the company being “deemed” to be insolvent and provide the basis for an application to the Court for the “winding up” of the company. (See “Winding Up”) Under Section 459C of the Act the company is presumed to be insolvent if a company has failed to comply with a Statutory Demand. Accordingly the delivery to a Debtor Company and non-compliance with the Statutory Demand will provide “proof” which is sufficient for a creditor to apply to the Court for the appointment of a liquidator to the company. What if I don’t agree with the debt? If the debt is disputed or there are irregularities in the document, the company should immediately seek independent legal advice and apply to the Court to set the demand aside on the basis that the debt, the subject of the Statutory Demand, is genuinely disputed. This application MUST be made within 21 days. Can the Statutory Demand just turn up in the post? The Statutory Demand may be: •delivered (or served) by leaving a copy of the document at the registered office of the debtor company; or •Sending it by post to the registered office of the debtor company; or •By delivering a copy of the Statutory Demand personally to the directors who reside in Australia. •So yes, a Statutory Demand could just “turn-up” in the post and still be effective.
What should I do about it? If you have received a statutory demand you need to attend to it immediately to avoid it progressing to a Winding up Summons. Contact us and we can help.
What is a Directors Penalty Notice?
A director of a company that has a Tax debt to the ATO may be served with a “Director Penalty Notice.” The aim of a Director Penalty Notice is to make directors personally liable for their company’s unpaid tax Debt. Director Penalty Notices have undergone some very significant changes. As part of the new regime these changes came into effect on 1st July 2012. The ATO used to allow the company 21 days to remit the penalty before they commenced recovery proceedings. This has now changed and is not negotiable and starts from the date the notice is issued. If you are having trouble with your ATO debts call us quickly, especially if you have NOT received a Directors Penalty Notice. This is very important. If you have received a Directors Penalty Notice you need to call us as quickly as possible before things get worse, because they will! The court also has no power to grant relief to a director from their obligations in respect to a Director Penalty Notice. In accordance with the new laws, the options of entering into an installment repayment arrangement and or place the company into Voluntary Administration to comply with a Director Penalty Notice and avoid personal liability have been removed. Call us and see what other options you have available to you To avoid personal liability, the recipient of the Director Penalty Notice must do one of the following within 21 days of the notice being issued.
- Comply with the obligation to pay the relevant tax liability in full.
- Have already appointed a liquidator and begun to wind up the company
The Director Penalty Notice clearly states the dollar amount of the tax debt owed by the director’s company. If you are a director it is important to be aware that if you receive a Director Penalty Notice and do not undertake one of these options within the 21 days allocated, you can become personally liable for the tax debt of the company. What this essentially means is that the ATO can then commence action against you rather than the company to collect the outstanding debt. Call us as soon as you begin to struggle with your debt. DO NOT WAIT till things become too difficult.
What is a Winding Up Notice?
If you have received a winding up notice this means that someone you owe money to has applied to the court to have your company placed into Liquidation, claiming that your company is insolvent. Insolvent means that you are unable to pay your debts as and when they fall due. Is it serious? YES, it is very serious. If you do nothing about it a hearing will be held (Usually about 4 to 6 weeks later) where the Individual or company who has applied to have your company wound up will be heard by the courts. If you have no defense or have made no arrangements during that time a Judgment will be made and if the Judgment is made to Liquidate the company, a Liquidator will be appointed THAT DAY and the next call you will get is from the Liquidator telling you they are coming in to Liquidate your company. What happens next? The “winding up” or “liquidation” of a company is the process by which a company’s assets are collected by a Liquidator and sold in order to pay its debts. Any monies remaining after all debt, expenses and costs have been paid off are distributed amongst the shareholders of the company. When the conduct of the winding up has been completed, the company is formally dissolved and it ceases to exist. The following parties can file an originating summons to wind up a company: – The company itself – A creditor of the company – A shareholder of the company – A liquidator – A judicial manager or – Various ministers on grounds specified under the law What can I do about it? To save what you can and avoid this situation getting worse you need to call us. There is a very specific process to follow to address this situation. Leaving it and hoping it goes away will not work! Yes, there are options available to you that you can take, but these options differ depending upon your current situation.
To find out what you can do, what is your best option and how you can protect your Company and personal assets and hopefully your business, call us. We will simply assess the situation and let you know what you can do.