LATEST
NEWS

I’m a Director – how will the new Safe Harbour Laws protect me?

As a business owner or director, it is essential to always be mindful of the early warning signs of company insolvency. By recognising and becoming aware of the indicators, business owners are empowered with the opportunity to renew, improve, and remodel their processes where necessary.

 

Company directors should be concerned when their business begins to show early signs of insolvency. 2 warning signs may include the following:

 

1) Using protected funds, such as employee superannuation contributions, GST or PAYG, to cover temporary cash shortages

 

 Protected funds such as GST, PAYG or superannuation should be isolated from your operating funds so these funds are not inadvertently used to fund general business costs. We recommend that these funds should be banked in a separate account so they are completely isolated from your operating account. Adverse consequences will flow from not reporting and paying these liabilities on time, such as penalties and interest and in some cases personal liability for the company director.

 

2) Suppliers demand cash on delivery (COD) terms

 

If a business has unstable cash flow and is unable to pay their creditors on time, then some suppliers may place your company on stop supply or COD (cash on delivery). In doing so, the suppliers are seeking to ensure that they will get paid.

 

The warning signs set out above are not exhaustive, and an insolvent business may exhibit signs that are not exclusive to the indicators listed above. It is up to the company director’s discretion to monitor the solvency of the company.  We recommend that all company directors monitor cash flows on a monthly basis when they analyse the monthly management accounts.

 

If you have noticed any of these warning signs, you should speak to an insolvency expert.  New laws have been introduced and you have be eligible to implement a safe harbour program to prevent you from becoming personally liable for insolvent trading if the company later fails.

 

To speak to a professional insolvency specialists, please contact Insolvency Services Australia on 1800 003 883. Our toll-free hotline is open 24 hours, every day 7 days a week.

GET CONFIDENTIAL, OBLIGATION FREE
ADVICE
NOW

CALL 1800 003 883 NOW