Corporate Insolvency

Is your business able to pays its debts as and when they are due and payable? It is with interest that I note that the Australian Securities and Investment Commission (ASIC) has published details of corporate insolvency activity for 2013/2014. The rate of company insolvency has dropped from the previous year, which is promising for business generally.

Not surprisingly, of all corporate insolvencies 86% of these were from NSW, Vic and Qld. Queensland made up 20.2% of all the corporate insolvencies in 2013/2014. There remains a trend of greater ‘debtor initiated’ winding up compared to ‘creditor/court initiated’ winding up. Perhaps this is a result of the company management (its directors) obtaining and receiving some early advice that the company’s financial situation is dire, and that to avoid what may be severe consequences of trading whilst insolvent a decision in made to appoint a receiver, an administrator or to liquidate the company.

This would not be an easy decision, but directors must remain aware of the financial position of companies, and it is true that failing to pay tax obligations remains a significant factor in corporate insolvency. It may be though that losing the business is bad enough, but trading while insolvent or failing to address tax debt early may, in some instances, result in personal liability for the director/s of the company.

The Australian Taxation Office had the laws surrounding ‘Director Penalty Notices’ (DPN) strengthened in 2012. The ATO has the power to issue a DPN to a director of a company for unpaid tax liabilities, including employee PAYG amounts and unpaid superannuation contributions. The director will become personally liable for penalty if it remains unpaid on the date the company was due to meet those various tax obligations.

Other Articles

Criminalising Coercive Control

On 2nd December 2021 the Women’s Safety and Justice Taskforce (the Taskforce) – chaired by the Honourable Margaret McMurdo AC – released their first Report “Hear Her Voice”.

Read More »