When people in Australia come to me planning to speak about Bankruptcy, they are usually loaded with questions. The internet has lots of information, but far too much of it is confusing or contradicts itself, so I make it my mission to try and make it more clear. One of the most common issues is ‘Will I lose my business if I declare bankruptcy?’ The short answer is no. If you are a manager of a business any shape or size you can keep your business if you would like to. In Australia, businesses that are insolvent have a few options for instance, liquidation, voluntary administration and so on. It’s people who go bankrupt not businesses.
Bankruptcy is a complicated area so get some qualified advice on this if you have a business. Generally speaking, the financial debts in a business and personal debts go hand in hand when a business owner declares bankruptcy. There are several vital implications for directors of companies when it comes to Bankruptcy in Australia: A bankrupt can not be a director of a company, so if you have a pty ltd company you are going to need to retire as a director once you’re bankrupt.
A limitation that applies when you are actually bankrupt as a business owner is that you may be in your own business as a sole trader only. Generally there are things you need to disclose as a part of that but essentially you can still run your business. For some business owners, bankruptcy affects their ability to run the business because of the licensing issues. Such as, if you run a building company, your license will be suspended once you’re bankrupt and consequently you can no longer trade without that license, so make sure you are asking the appropriate questions when it involves licenses and Bankruptcy in Australia.
But if your business is not impacted directly by such issues, then you’ll have to restructure the way you run your business. There are considerations when and if you go bankrupt as a business owner: you can not acquire heaps of debt in your business, then go bankrupt and then open the doors the next day like practically nothing had happened. There are laws in place to prevent what is called phoenix companies appearing out of the ashes of an old company.
Having said that, it’s just a matter of consulting with the correct people about Bankruptcy. In this circumstance you may believe you need a liquidator for your company, and you may be right, but keep in mind that every liquidator is different and have their own motives. Liquidators make money from your liquidation – heaps of money – so what advice do you think you will get?
When it comes to Bankruptcy, I think that giving generic advice in this area is possibly unsafe as it can have very severe implications for directors and business owners. This is because it is just one of those cases where what the right guidance for one business owner is the wrong advice for the other. There are some principles however, that you may benefit from. There is no restriction to the size of the business you run even though you are bankrupt. You can employ staff. You can constantly deal with your companies under certain conditions, the main one being you will need to meet the payment terms agreed upon.
So when it concerns Bankruptcy, don’t get extremely confused about what you can and can’t do as a business owner, just get the appropriate advice … If you would like to learn more about what to do, precisely where to turn and what questions to ask about Bankruptcy, then feel free to consult Bankruptcy Experts Australia on 1300 795 575, or visit our website: www.bankruptcyexperts.com.au.