The Director Edition

Risks facing Directors; Budget update and dealing with the ATO

Payment of Dividends; the importance of Company Directors having a Will

Unpaid employee entitlements and GEERS; Setting aside a Statutory Demand

Directors be aware – changes to the Director Penalty Notice regime apply

Personal Properties Securities Act – Retention of Title; Tax Security Bond

Indicators of Insolvency

Directors be aware - ATO Director Penalty Notices are on the come back!

Are Voluntary Administrations still the appointment of choice?

Limiting a Director's Personal Liability

The Director Edition

This special Update focuses on key issues faced by company directors, providing commentary on recent cases concerning director liability, director duties, shadow directors and director liability for insolvent trading.

Risks facing Directors; Budget update and dealing with the ATO

This Update offers some answers to the vexing question of when to stop trading an insolvent company, comments on a significant proposed amendment introduced in the 2011/2012 Federal Budget to expand the Director Penalty Notice regime, and offers practical tips on dealing with the ATO for payment arrangements.

Payment of Dividends; the importance of Company Directors having a Will

This Update highlights recent amendments introduced into the Corporations Act 2001 that enable greater flexibility when paying dividends, but can present risks for directors.

We also consider the importance of company directors having a Will, following a recent matter where a company required liquidation but the sole director had died intestate.

Unpaid employee entitlements and GEERS; Setting aside a Statutory Demand

This Update provides business advisers with advice on the benefits of the Federal Government's GEERS Scheme, in many instances the only avenue available to a liquidator to meet unpaid employee entitlements.

We also consider the ramifications of a Statutory Demand notice being issued on a company director by a creditor, and options available to set aside that demand.

Directors be aware – Changes to the Director Penalty Notice regime apply 

The law surrounding Director Penalty Notices has undergone some very significant changes in recent times, and a new regime is now in effect.

To avoid personal liability, the recipient of the Director Penalty Notice must now undertake one of three options within 21 days of the notice being issued.

As this Update explains, a director can otherwise become personally liable for the tax debt of the company.

Personal Properties Securities Act – Retention of Title; Tax Security Bond

Two new changes to legislation will have significant impacts on SME businesses.

The first change introduces a radical new approach to how suppliers will need to register and enforce Retention of Title claims to stock sold on credit terms.

The second change relates to the introduction of a tax bond that the ATO may impose on businesses to secure likely or expected tax obligations. Whilst the intent of the legislation is to help curb phoenix companies, we can see that the tax bond may also create a difficulty for businesses attempting to restructure their affairs through a Deed of Company Arrangement or other legitimate means.

This Update provides details of these legislative changes and the effect they may have.

Indicators of Insolvency

Insolvency is not always easy to determine, however there are clear signs that may indicate your company is in financial difficulty.

This Update provides a list of indicators that may determine whether or not a company is insolvent or likely to become insolvent.

Directors be aware - ATO Director Penalty Notices are on the come back!

In 2009 we saw the very conciliatory approach by the ATO in supporting business taxpayers facing financial difficulties. However, in 2010 we have noticed a re-emerging trend by the ATO in increasingly using Director Penalty Notices (or 222 Notices) to enforce the payment of overdue tax debt.

This is hardly surprising, as it is reported that the number of problematic cases for the ATO had increased to 1.34 million cases in 2009, and by January 2010 the amount of debt subject to an ATO payment arrangement had risen to approximately $14.2 billion.

This Update provides our advice on the implications and risks Directors and their advisers should be aware of in light of this emerging trend, together with some tips on managing credit.

Are Voluntary Administrations still the appointment of choice?

The amendments contained in the Corporations Amendment (Insolvency) Bill 2007 commenced on 31 December 2007.

These amendments will have a widespread impact on the way corporate insolvency administrations are conducted, not the least of which will be the choice of whether a voluntary administration is still the most appropriate form of insolvency procedure to adopt.

This Update provides our advice concerning the liquidation of companies and the most appropriate choice of winding up procedure.

Limiting a Director's Personal Liability

We are currently witnessing an alarming trend in South Australia where company directors are financing non-viable business with the use of personal credit card debts.

Whilst this strategy may extend the life of a business, it is usually short-lived and inevitably leads to the demise of the corporate entity and the personal insolvency of its directors.

This Update provides further insight into this trend, as well as a brief checklist on business viability and the benefits or otherwise of continuing operations.