The economic impact of COVID-19 across Australia has been enormous. If your business has taken a financial hit, our hearts go out to you and everyone who is in the same boat.
If your business is struggling to pay its debts, you could be at risk of insolvency.
It has never been more crucial to understand what insolvency is, what it means for businesses and directors and where you can get help if you need it.
When a business can’t pay its debts on time, it is considered insolvent. Poor cash flow, ongoing losses, unpaid creditors and overdue taxes are all symptoms of insolvency.
If you find your business is in this position, it’s important to take action immediately. Insolvency doesn’t necessarily mean the end of your business.
There are a number of avenues for insolvent businesses, including:
If you suspect your business is insolvent, you should not get into further debt before seeking professional financial and legal advice.
In normal circumstances, directors can become personally liable for a company’s debts if caught trading while insolvent.
As a director you have an obligation to:
The Australian Government has announced a number of measures in light of COVID-19 to provide temporary relief for businesses who are struggling financially.
The following measures will apply until 31 December 2020:
Insolvency is challenging to navigate at any time. With the added pressures and concerns surrounding COVID-19, it’s natural to feel worried and discouraged.
If you suspect your business is insolvent or think you might be headed that way soon, the most important thing to do is seek help fast. In addition to the COVID-19 temporary relief measures in place, there are a number of strategies you can use to ensure the best outcomes.
Speak with the team at Lawrence Group and we can help you find the best solution moving forward.
This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.