A bankruptcy notice is essentially a demand for the payment of money by a creditor (a person who is owed money) from a debtor (a person who owes money). They are generally served to enforce a court judgement or judgements worth $5,000 or more against a debtor.
What Do I Do if I Have Received a Bankruptcy Notice?
If you have received a bankruptcy notice, you need to either comply or apply to have it set aside. Whilst you would normally have 21 days in which to do one or the other, this has been extended to 6 months while Covid-19 is an issue. You can either pay the amount owed in full or reach an agreement with the creditor (preferably in writing) such as to pay the amount owed in instalments.
However, if you want to apply to the court to have the bankruptcy notice set aside, you must also act within the time stated in the notice. If you fail to act in this time, you will commit an ‘act of bankruptcy’. It will allow the creditor to lodge a creditor’s petition to apply for a sequestration order. This in turn will make you bankrupt.
Applying to set aside a bankruptcy notice
Alternatively, you can apply to the Federal Court or Federal Circuit Court to set aside the bankruptcy notice. You can also apply to extend the time for compliance with the notice. These options are available if you can argue one of the following.
- There is a defect in the bankruptcy notice. For example, the name on the notice is wrong, there was no time limit for compliance with the notice, the judgement or order was worth less than $5,000 or the notice was not served properly.
- The debt does not exist, such as if you have already paid for it.
- You have a claim against the creditor, equal to or greater than the amount claimed in the bankruptcy notice.
- The bankruptcy notice is an abuse of process. This means that it has an improper purpose or is providing unfair pressure on the debtor to pay the debt.
To set aside a notice you need to fill out and file Application Form B2, an affidavit and the bankruptcy notice at the Federal Court or Federal Circuit Court. You will need to pay a filing fee. Then you need to serve a copy of the application and supporting affidavit that have been stamped by the court on each respondent to the application. This must happen personally within 3 business days after the application is filed.
Bankruptcy notices can be complex to deal with, and the Bankruptcy Act 1966 is a complex legislation, thus it is suggested to seek legal advice before acting.
To find out more, please do not hesitate to contact us.
COVID-19 continues to disrupt the operation of businesses globally, presenting new challenges to company directors on how to continue to carry out their duties and obligations. While many directors are focused on the immediate practical implications of operating in these challenging times, directors must ensure they keep in mind their broader obligations to stakeholders under the Corporations Act 2001 (Cth). In this article, we address the potential issues facing directors in the context of the current pandemic.
There are numerous statutory obligations directors must adhere to. Directors must continue their duty to act in good faith and in the best interests of the corporation. Given the uncertainties surrounding the COVID-19 pandemic it may be challenging for directors to determine how their immediate actions may impact the long-term success of the company and its various stakeholders.
While directors must of course focus on the immediate implications of operating in these uncertain times, they must ensure that they continue to act in good faith and in a reasonable manner and make decisions based on the most reliable and up-to-date information in front of them. Continue to place priority on protecting the health and welfare of staff, and consider enacting contingency plans to avoid exposing the company to outside risks.
Financial Reporting and Annual General Meetings
The coronavirus has temporarily impacted companies’ abilities to hold annual general meetings (AGMs). For listed and unlisted public companies required to hold an AGM by 31st May 2020, ASIC has confirmed that it would take no action if AGMs are postponed up to the end of July or if AGMs are held virtually in compliance with s 249S of the Corporations Act. The holding of virtual AGMs is permitted under the Corporations Act, however entities must check whether their constitution restricts meetings being held in this way and seek legal advice on section 1322 of the Corporations Act.
Insolvency and ‘COVID-19 safe harbour’ provisions
The Coronavirus Economic Response Package Omnibus Act 2020 included, among other measures, a new section 588GAAA into the Corporations Act granting temporary relief for financially distressed businesses. The amendments provide a ‘safe harbour’ to grant relief for directors from potential personal liability for insolvent trading.
In order to be able to rely on these measure, the debt leading to insolvency must have been incurred in the ordinary course of the company’s business, during the six month period commencing from the 25 March 2020 (or longer as prescribed in another regulation), and before any appointment of an administrator or liquidator during that period.
In relation to insolvent trading, directors should seek advice early from a qualified and independent advisor about the company’s financial affairs and the options available to manage the disruption caused by COVID-19.
Check out our blog here for further more information and analysis on the restrictions and rules in place during COVID-19.
It is important to be fully aware of your duties and obligations as a director during this rapidly evolving and challenging environment during COVID-19. If you would like more information on how we can assist you, do not hesitate to contact us on 9963 9800 or at email@example.com.
Businesses are facing major challenges amid COVID-19 pandemic leading to massive job cuts. In light of the challenges, the Australian Government has announced temporary changes to insolvency laws to help businesses and individuals manage the current economic crisis.
Companies: Insolvent trading
Directors will be relieved of any personal liability from their duty to prevent insolvent trading for a period of 6 months. This applies to debts incurred in the ordinary course of business and companies will still be liable for debts. Dishonesty and fraud cases will still be prosecuted.
Companies: Statutory demands
The threshold at which creditors can issue a statutory demand will be increased from $2,000 to $20,000 for a period of 6 months. Further, the time limit to respond to a statutory demand will be increased from 21 days to 6 months.
The threshold amount for issuing a bankruptcy notice against an individual will be increased from $5,000 to $20,000. The time limit to respond to a bankruptcy notice will be increased from 21 days to 6 months. These will last for a period of 6 months.
If you would like further information, please do not hesitate to contact one of our experienced litigation solicitors on 9963 9800 or via email at firstname.lastname@example.org.
This article looks at companies – how to set one up and the pros and cons of a company structure. When commencing a business venture, it is necessary to consider the most appropriate type of business structure to put in place. Different business structures have different benefits and disadvantages.
Key Features of Companies
A company is a separate legal entity capable of holding assets in its own name and liable for its own obligations. A company is owned by shareholders. The liability of shareholders is usually limited to the amount of their shareholding guarantee. This means that shareholders can limit their personal liability and are not generally liable for the debts of the company.
Directors manage the day to day business affairs of the company. There are a number of duties and obligations for company directors including an obligation that a director must act in the best interests of the company.
In Australia, the most common forms of companies are:
- Private company (or a proprietary limited company): this is a company which does not sell its shares to the public and cannot raise money from the general public through share issue.
- Public company: is a company whose shares are owned by the public at large, with the company’s shares usually listed for trade on a stock exchange.
Companies are regulated by the Australian Securities Investment Commission (ASIC) and governed by Corporations Law.
How to set up a company
An Australian company must be registered with ASIC. When ASIC registers a company, the company will be given an Australian Company Number (ACN). An applicant must nominate a principal place of business and registered office for the company.
Prior to lodging an application for registration, consideration should be given to:
- the proposed company name. A check should be undertaken to confirm the availability of the proposed name. If no name is specified in the application, the company will be referred to by its ACN.
- what rules will apply to govern the company. This can generally be the replaceable rules from the Corporations Act (which means that the company does not require its own written constitution), a constitution or a combination of the two.
- who will be the shareholders and directors of the company.
A company needs its own Tax File Number, which can be obtained online from the Australian Taxation Office (ATO) and an annual tax return must be filed.
A company must be registered for GST if its annual turnover is $75,000 or more. An Australian Business Number (ABN) is required to register for GST and can be obtained online through the Australian Business Register.
Pros and Cons
The advantages of forming a company include:
- liability for shareholders is limited
- easier to raise finance for expansion
- ownership can be easily transferred
- taxation rates can be favourable
The disadvantages include:
- expensive to form, maintain and wind up
- reporting requirements can be complex
- must publicly disclose key information
- owners cannot offset losses against other income
A company might be a suitable business structure for unrelated parties who want to commence a business venture together, where there is a degree of risk and limited liability is wanted or where there is a desire to list the company on the stock exchange.
Establishment of a company and ongoing administrative and compliance costs associated with Corporations Law can be high. An accountant or lawyer can help you understand the cost and risks of a company and explain whether a company structure would be suitable for your business going forward.
If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or email email@example.com.
Are you considering starting a business?
There are four main types of business structures for conducting business in Australia, each with their own advantages and disadvantages. A person can carry on business as a sole trader, partnership, trust and/or company.
The choice of business structure is an important decision to make at the start of a business venture, as the structure can have an impact on tax implications and reporting requirements during the lifetime of the business. When setting up a business structure, consideration should be given to factors such as how many people will be involved in the business, what the business will do, your potential risk or personal liability, how much income is likely to be earned from the business and the intended growth of the business.
A person can carry on a business on his or her own behalf as a sole trader. A sole trader can trade under his or her own name or a registered business name. The business income, net of business expenses, earned as a sole trader is taxed at the same rate as individual tax payers.
This is the simplest form of business structure, with low establishment costs and with minimal legal and compliance requirements.
The disadvantages of this type of business structure include being personally liable for all obligations incurred in the course of the business, your personal assets may be at risk and there is no opportunity to split profits to others.
Two or more individuals can carry on business in partnership, where the income from the business is received jointly. Partnerships are relatively inexpensive to form and operate. Most partnerships are established by a partnership agreement which sets out the rights and obligations of the partners. A partnership itself is not taxable, rather each partner pays tax on their share of the net income of the partnership.
The downside to this type of business structure is that partners are severally and jointly liable for the obligations of the partnership. There is also potential for dispute and loss of trust between the partners.
Under a trust, a trustee owns the property or assets of the trust and carries on the business on behalf of the beneficiaries of the trust. A trustee can be an individual or a company. A formal Deed is required to set up a trust and there are annual tasks for a trustee to undertake.
The advantages of a trust are that there is flexibility in income distribution and income can be streamed to low income tax beneficiaries to take advantage of their lower marginal tax rate. Furthermore, assets can be protected through a properly drafted Deed.
The disadvantages are that trusts can be costly to set up and there are more compliance and legal requirements.
A company is a separate legal entity capable of holding assets in its own name. The words “Pty Ltd” after a business name show that the business is a registered legal entity trading in its own right. A company is owned by shareholders and directors manage the company’s day to day business and affairs. The shareholders of a company receive any company profits in the form of dividends. Shareholders can limit their personal liability and are not generally liable for the company debts. Instead, the financial liability of the company is limited to the assets owned by the company.
Companies are governed by Corporations Law and there are a number of duties and obligations for company directors. Primarily, directors have an obligation to act in the best interests of the company.
Establishment of a company and ongoing administrative and compliance costs associated with Corporations Law can be high. There is also a requirement to publicly disclose key information.
Each business will vary and no business owner’s circumstances will be the same. It is advisable to talk to an accountant or solicitor about the costs and risks of each business structure to make sure that the business structure used is the right one for the business and its needs going forward. In the following newsletter, we will discuss these structures in more detail.
If you or someone you know wants more information or needs help or advice, please contact us on (02) 9963 9800 or email firstname.lastname@example.org.