"Your financial future starts today" Article by Tina Zawila

In a city like Gladstone there are a lot of young people who have been earning above average salaries for the past couple of years, and I'm becoming very concerned that many of them do not have much to show for it! 

I understand that in your 20's life is usually about having a great time with your mates and spending your money how you want to spend it...the future can wait!  However, with a little bit of help and advice you may be able to start setting yourself up for the future and still have money for the things you enjoy.

 I was inspired recently when a young, single, 30 year old male came to me for financial advice.  He suddenly realised that his twenties are behind him and it's time to "grow up and be financially responsible". 

 The best thing - he asked for help!

 At Sothertons helping others achieve their goals in business and in life is what gets us up in the morning and makes us feel like we have made a difference. 

 So what can we do for Mr 30-year-old?

 *  We start with a personal budget and online software to help him monitor his spending and savings.  You need to measure to be able to manage.

 *  We review his current position and look for savings, debt reduction and/or investment opportunities.

 *  We review his personal insurances - sickness and accident, trauma and life insurance.  No-one is invincible and obtaining this type of insurance when you are young can save you a fortune in premiums in the future.

 *  We can prepare his income tax returns each year and provide him with advice to minimise tax payable/maximize his refund.

 *  If (or when) he enters into a business venture, we will be there, helping him with all of his business management, accounting and taxation needs.

 Don't try to "go it alone" or "put off" your financial future forever.  Ask for help now and set yourself up for life.  Call Sothertons on 4972 1300 today

“Rising from the ashes - Part 2” Article by Steve Marsten

Following on from my article last week interestingly, ASIC has announced a crackdown on illegal “phoenix” companies recently, it seems like welcome news. Unfortunately, with a failure to attach a clear definition of the term, enshrined in law, such a crackdown may prove ineffective.

In the business community, it is widely recognised that it is not a good look to go broke, through bankruptcy or liquidation, but it is not illegal. The illegality of insolvency comes from the specific conduct of the people at the time.

 One type of conduct that I have discussed previously in this column is the “phoenix activity”—it involves a director or directors arranging for a new company to rise from the ashes of an old liquidated company, looking deceptively similar by using effectively the same name, brand or goodwill.

 

But if the conduct is not defined under the law, then it is not a crime to engage in the conduct.

It is not always appreciated that if a company is merely suffering from cash flow difficulties, the directors personally (even without a director’s guarantee) owe a duty to creditors:

 Once a company becomes insolvent, then the directors’ duty to consider the interests of creditors gives rise to a duty not to prefer some creditors over other creditors and contributories who have claims on the fund in liquidation. Thus if directors of an insolvent company decide to prefer creditors with guaranteed debts, they may be held to be in breach of their duties as owed to the company.

 Regardless of these rules, it is not a crime to set up a “phoenix” company. There is no such thing as a “phoenix” company under the laws of our country.

 There have been some recent attempts to change the laws, but they have not yet all been passed. The driving force behind the changes has been the ATO. Interestingly, these changes were proposed following the release of a discussion paper by the ATO, which was focussed upon fraudulent “phoenix” activity and not “phoenix” activity alone. ASIC often fails to differentiate between the two and regularly refers to “phoenix” activity alone as amounting to misconduct. Contact Steve or Tina of Sothertons to learn how to identify a potential “phoenix” company on 07 4972 1300.

 

"Rising from the ashes..." Article by Steve Marsten

I often read with interest the collapse of various companies and businesses in the region. It’s often a very stressful time for the owners. However it’s also stressful for the employees and creditors of those companies. The problem you hear and see however is - the business continues to operate as if nothing really changed. If you think it’s a rarity – it probably happens more often then not. As a creditor you may not even know other than being advised of a new bank account number and perhaps the subtle change of an ABN as well.

Now these business people are not breaking the law – presumably, as many of the issues are moral rather than legal issues.

The director of a “phoenix” company will only be automatically liable (under the “phoenix” rules) for the relevant debts of the new company (i.e. the “phoenix” company). For example:

 ■Company A Ltd collapses and goes into liquidation owing $1m.

 ■Either before or within 5 years of the collapse, a director of Company A Ltd starts up a new company with a similar name, “Company A Technology Ltd”, and starts doing business out of the new company, apparently leaving unsecured creditors of the old company up the creek.

 ■Company A Technology Ltd will likely be a “phoenix” company.

 ■The director will be personally liable for relevant debts (which has a particular meaning) of the Company A Technology Ltd (i.e. the “phoenix” company) if it fails.

 ■But the director will not be liable for the $1m of debts of Company A Ltd (i.e. the original, failed company).

 So the “phoenix” rules effectively give directors of “failed companies” (note there is a particular definition of that term) what some may consider a free pass on debts of their first company (although they may be liable to fines – see below – and there are also numerous other company law liabilities that may arise and result in personal liability; these are very selective thoughts only). That is the nature of limited liability companies, which are essential for modern commerce.

This does not give any creditor or employee that much comfort however it’s the law we have. At Sothertons we assist creditors with strategies to limit the exposure to these companies. Call Steve or Tina on 4972 1300.