To ensure that you get expert advice in an insolvency or bankruptcy situation, you should take active steps to find out whether the person you are talking to is a registered and licensed liquidator or registered and licensed trustee in bankruptcy. If the person you are talking to starts discussing the prospect of referring you a person on their “panel of liquidators” or “panel of trustees” they probably aren’t licensed to give you proper insolvency advice.

To check if the person you’re talking to is a professional or a pretender, you can confirm their registration with government regulatory authorities.

If you’re taking advice from someone about company liquidation or corporate insolvency, make sure they are a registered liquidator by searching the Australian Securities and Investments Commission Professional Register.

If you’re taking advice from someone about a bankruptcy or personal insolvency matter, make sure they are a registered trustee in bankruptcy by searching the Insolvency Trustee Service Australia’s lists of Registered Trustees or the Insolvency and Trustee Service Australia’s lists of Registered Debt Agreement Administrators.

 Our insolvency lawyers are seeing a number of new firms in the market that hold themselves out as being able to assist company directors with liquidations and individuals with bankruptcy or alternative insolvency arrangements.  These people usually describe themselves as representatives, guardians, managers, consultants and the like.  Invariably, the companies that our bankruptcy and insolvency lawyers keep hearing about are unqualified middlemen looking to make money from individuals and companies that find themselves in financial difficulty or on the verge of insolvency.

The usual method of operation for the insolvency middlemen is to lure people in by telling them that they can make the process easier for them, appoint “friendly” company liquidators or “friendly” trustees in bankruptcy.  They usually talk about how difficult insolvency is to deal with and how you need someone to act as a conduit between you a liquidator or a trustee in bankruptcy.

What actually happens is that the middlemen take a fee for referring you to “business consultants”, financiers or other people who will tell you that they can help in an insolvency or bankruptcy situation.  That person will usually take another fee from you and you will then be referred to a liqudator or trustee in bankruptcy.

Aside from the fact that the insolvency middlemen are only in the market to make a quick buck from individuals and companies who are experiencing financial problems, using their services can cause major problems for people considering bankruptcy and directors of companies on the verge of insolvency because they:

1.   are not regulated;

2.   are not insured;

3.   are not licensed;

4.   have no relevant qualifications;

5.   usually can’t be sued; and,

6.   most of the time, their advice is just plain wrong.

If you are worried about personal or company insolvency, you need expert advice from professionals who practice in the area.  Your first port of call should be an insolvency accountant who is a registered liquidator, an insolvency accountant who is a registered trustee in bankruptcy or an insolvency lawyer.  Those professionals have to keep up to date with changes in the law and regulatory policies relating to insolvency.  They are insured, regulated and will provide you with the right advice for your circumstances.

If you do need help with personal bankruptcy or company insolvency and you contact a practitioner in the area, you should ask:

1.   are they a registered liquidator?

2.   are they a registered trustee in bankruptcy?

3.   are they able to take an appointment as your company’s liquidator or your trustee in bankruptcy in  their own name?

4.   what qualifications do they have?

5.   what government and professional bodies regulate their behaviour and professional ethics?

If you are concerned about corporate insolvency or bankruptcy, you need expert insolvency advice.  Go to our contact page, send us an email or call us today.  Our insolvency lawyers are ready and waiting to give you the right advice.

Personal and financial reasons to seek the ending of a a partnership

The partnership laws allow for a partner to approach the Court for orders dissolving a partnership when the business of the partnership can only be carried on at a loss.
The Court may also make orders for the dissolution of a partnership when a partner becomes permanently incapable of performing the partner’s part of the partnership agreement or when a partner is of unsound mind and incapable of managing his or her affairs.

Ending a partnership for dispute resolution reasons

At times, business disputes within a partnership can be the basis for going to Court and seeking orders for the dissolution of a partnership.

The Court has the power to order that the partnership be dissolved when one partner has been guilty of conduct that is calculated to prejudicially affect the carrying on of the business of the partnership.  A Court may also make an order when a partner wilfully or persistently commits a breach of the partnership agreement, or otherwise conducts himself or herself in such a way that it is not reasonably practicable for the other partners to carry on the business in partnership with the offending partner.

A further ground that may be relied on is the ground that it is just an equitable that the partnership be dissolved.  The circumstances that a Court might consider under the just and equitable ground are such things as:

1. fraud, mismanagement or oppression in the management of the partnership;

2. the substratum or common intention between the partners is gone and the objects of the partnership cannot be achieved; or,

3. where there is a deadlock in the management of the affairs of the partnership.

The above is not an exhaustive list but indicative of the things a Court might take into account.  The scope of the matters that can be raised in Court is very wide.

What happens if the Court makes an order dissolving a partnership

Usually, the partnership enters into receivership and an independent receiver is appointed to the partnership.  The role of the receiver is to preserve the property of the partnership and wind up its affairs.  That will usually involve a sale of the business of the partnership, payment of the debts of the partnership and the payment of any funds leftover to the partners.

Partnership disputes and civil litigation can be costly if you don’t make the right decisions, you need expert business law and litigation law advice.  Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your dispute resolution needs.

In an earlier post, we discussed how long you have to make an application to set aside a statutory demand.  In this post, we look at one of the grounds for setting aside a statutory demand, namely a “genuine dispute”.

If you have received a creditor’s statutory demand for payment of debt, the Corporations Act allows you to file an application to set aside the statutory demand with the Supreme Court of New South Wales or the Federal Court of Australia.  A Court will usually set aside a statutory demand when there is a genuine dispute about the existence  of the debt referred to in the statutory demand or a genuine dispute about the amount of the debt referred to in the statutory demand.

If a Court is to set aside a statutory demand, it must be satisfied that the dispute is real, bona fide, exists in fact, not hypothetical, not spurious and not misconceived.  The Court’s only task is to determine whether there is a genuine dispute, it is not required to resolve the dispute between the parties when considering an application to set aside a statutory demand.

If a company who receives a statutory demand raises a plausible argument in relation to the existence or amount of the debt referred to in the demand and that argument warrants further investigation, a Court will ordinarily set aside the statutory demand.

You should always remember that an application to set aside a statutory demand is only effective if it is filed and served within 21 days of the date of service.  Statutory demands are very important documents that should be acted on immediately.

If you have been served with a statutory demand you need expert insolvency advice and you need it immediately.  If you are concerned about corporate insolvency or would like to make an application to set aside a statutory demand, go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your insolvency law needs.

Firstly, an appropriate person needs to apply to the Supreme Court of New South Wales for letters of administration.  Those documents allow for the collection of assets, the payment of funeral expenses and the distribution of the remaining intestate estate after the payment of debts, duties and taxes.  Sometimes the Court will require an administration bond to be lodged to act as insurance against the administrator failing to property administer the estate.

When the administrator comes to distribute the estate, the intestacy rules provide that the whole of the property of the deceased is to be distributed to their spouse or domestic partner.  If there is no spouse or domestic partner, the whole of the estate may be divided among any children of the deceased.  If there is no spouse, domestic partner or children, the whole of the intestate estate may be distributed to the parents of the deceased.  The distribution of the property works its way down the family tree to brothers and sisters, grandparents then aunties and uncles.  If the property of the deceased cannot be distributed to any of those people, it is then handed over to the State government.

If a person dies without a will, the control that they would have otherwise had over their property is taken away.  The laws of intestacy can require the distribution of a deceased estate in a way that is not in accordance with the wishes of the deceased.  For instance, an ex-husband or ex-wife of the deceased may be able to take assets in priority to a current domestic partner.  Also, if the deceased intended that a bequest or gift be made to a charity or other institution, the laws of intestacy don’t provide for that sort of distribution.  Death without a will can also impose a lot of stress on those left behind as they try to navigate the complex laws relating to wills and estates.

Up to 40% of Australians die without a will.  Having a lawyer draft a valid and enforceable will can save a lot of time and money for those left behind.  A clear, valid and enforceable will also gives you piece of mind that your wishes will be carried out properly by your executors.

If you don’t have a last will and testament, would like to update your will or if someone close to you has died intestate go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our succession and estate planning lawyers are waiting to help you with your inheritance law needs.

What is an enduring guardianship?

An enduring guardianship is a legal document that an adult (known as the “appointor”) may use to appoint a guardian to manage or conduct their personal and health affairs.

The enduring guardianship operates in a period when the appointor is totally or partially incapable of managing their person because of a disability.

What powers are granted to an enduring guardian?

The appointor can limit or expand the power of an enduring guardian as they see fit.  The usual powers that are granted to an enduring guardian are:

1. deciding where the appointor is to live;

2. deciding what healthcare the appointor is to receive;

3. deciding the other kinds of personal services the appointor is to receive; and,

4. giving consent to carry out medical and dental treatment on the appointor.

What is an advance health care directive?

An advance health care directive or advance care directive is a document that sets out your wishes in relation to future medical treatment in the event that you lack the capacity to make decisions or make your wishes known.  It is often referred to as a living will.  We usually incorporate such a directive in an enduring guardianship document.

The advance care directive can operate in two ways.  Firstly, it is a direction to your enduring guardian as to what healthcare measures you would like medical staff to take.  For instance, you can direct your guardian to ensure that artificial means of preserving your life such as life support are not used in circumstances where there is no hope for recovery.  Alternatively, you can direct your guardian to ensure that all measures are taken to resuscitate, preserve life and treat your condition even though there is little hope for recovery.  Secondly, our standard advance care directive contains a direction to healthcare workers and family members to honour the wishes expressed in your advance care directive.  The fact that the directive expresses your intention to bind your guardian and medical professionals while you are still alive is the basis on which the document is called a living will.

Why you should see a lawyer about your enduring guardianship and advance health care directive.

In order for an enduring guardianship to be effective, a lawyer must witness the signatures of the appointor and the enduring guardian.  The lawyer must also sign a certificate saying that he or she explained the document to the parties, they all appeared to understand its effect and they signed the document voluntarily.  Enduring guardianship and advance care directive documents are important legal documents that place a great deal of power and control in the hands of the person appointed.  The documents need to be expressed properly and must be tailored to the individual circumstances of the appointor whilst still complying with the law.

If you need advice or assistance in relation to enduring guardianship, advance care directives or succession plans,  go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your estate planning needs.

The key changes proposed by the draft will affect company directors in a number of ways.  Firstly, the Commissioner of Taxation will be able to make an estimate of the amount payable by a company in respect of PAYG tax and the superannuation guarantee charge.  Secondly, the legislation contemplates that directors will be held personally liable for the superannuation guarantee charge as well as unpaid PAYG.

The major alteration to the law that is proposed by the exposure draft is that a director’s liability for unpaid PAYG and superannuation guarantee charge will arise automatically.  The current law requires the ATO to serve a penalty notice on a director and the director becomes liable at the expiration of 21 days.  The new law proposes that:

1. if the tax or superannuation debt is less than 3 months old, the Commissioner must comply with the current 21 day notice regime; and,

2. if the tax or superannuation debt is more than 3 months old, the director is personally liable and the ATO can commence proceedings to recover the funds without notice.

Under the current regime, if a director pays the debt, appoints an administrator to the company or the company commences winding up within 21 days of the ATO posting a director penalty notice, the personal liability of the director is extinguished.  If the proposed law is passed and the tax debt is more than 3 months old, the only way a director’s personal liability can be extinguished is by payment of the full amount claimed by the ATO.

The proposed Act also contemplates giving the Commissioner of Taxation discretion to reduce a director’s entitlement to PAYG withholding credits along with those of their associates.  That is to say, if a company withheld PAYG tax from the wages of directors and their associates but failed to pay that PAYG withholding amount to the ATO, any credit claimed by the directors or their associates in their individual tax returns in respect of the PAYG amount will be reduced and give rise to an increased individual tax bill.

If you are concerned about phoenix activity or if you have received a Director Penalty Notice from the ATO, you need urgent expert insolvency advice.  Go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your insolvency law needs.

What is an enduring power of attorney?

An enduring power of attorney is a document that allows a person known as a ‘principal’ to appoint another person known as an ‘attorney’ to act on behalf of the principal in relation to his or her financial, business and property affairs.  An enduring power of attorney operates even if the principal lacks capacity through a loss of mental capacity after the execution of the power of attorney document.

What can an attorney do under an enduring power of attorney?

An attorney can do all things that a principal could lawfully authorise them to do.  That authority extends to buying and selling property, buying and selling shares as well as making business decisions.  A better way of defining the extent of the power is to look at the legal limitations imposed on an attorney.  An attorney must:

1. always act only in the best interests of the principal;

2. avoid any conflict of interest;

3. obey a principal’s instructions while they are mentally capable;

4. keep their money and finances separate from those of the principal;

5. keep accurate and proper records of all dealings with the principal’s property and money; and,

6. act in accordance with any limitation or condition contained in the power of attorney document.

When does an enduring power of attorney commence operation?

The principal can nominate when the power of attorney is granted.  It can happen immediately, at a future date, when the attorney accepts the appointment or when the attorney forms the opinion that the principal needs assistance in managing his or her affairs.

How does an enduring power of attorney help with business succession planning?

An enduring power of attorney is an element of good business succession planning.  It allows for the smooth running of your business in the event that you suffer an accident and are unable to properly manage your affairs or for some reason lose the mental capacity to properly administer your affairs.

Why you should see a lawyer about your power of attorney.

By law, enduring powers of attorney need to be explained to the principal by a lawyer.  An enduring power of attorney also requires a certificate from a solicitor saying that the principal appeared to fully understand the legal effect of the document.  A power of attorney places a great deal of trust in the attorney and needs to be tailored to the individual circumstances of the principal while still complying with the law.

If you need advice or assistance in relation to enduring powers of attorney or business succession plans,  go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your estate planning and business law needs.

The stand alone cross border insolvency provisions that relate to corporate insolvency are very similar to those found in the Bankruptcy Act 1966.  Under the terms of the Bankruptcy Act, Australian bankruptcy Courts must act in aid of or be auxiliary to the bankruptcy Courts of the following countries (including their colonies, overseas territories and protectorates):

1. the United Kingdom;

2. New Zealand;

3. Canada;

4. Jersey;

5. Singapore;

6. Malaysia;

7. Switzerland;

8. Papua New Guinea; and,

9. the United States of America.

Although the bankruptcy Courts in Australia are obliged to act in aid of or auxiliary to the bankruptcy Courts of the above countries, the Australian Courts retain a discretion in relation to the nature of the aid provided.  In the past, Courts have appointed receivers to the Australian property of bankrupts or made orders providing for the transfer of Australian assets to foreign insolvency practitioners.  Australian Courts are usually concerned to give effect to the orders of foreign bankruptcy Courts and ensure their objectives are achieved.

Under the same provision, Australian bankruptcy Courts have the discretion to act in aid of or be auxiliary to the bankruptcy Courts of other countries that are not referred to above.

If you are an insolvency practitioner and you need expert cross border insolvency advice about a matter arising in Australia or overseas, go to our contact page, send us an email or submit an enquiry using the form on the right side of your screen.  Our professional staff are waiting to help you with your insolvency law needs.

“SELLING DESIGNS AND PATENTS FOR COFFEE CUPS AND LIDS

A receiver’s sale of intellectual property – registered designs and patents for coffee cups and lids – survived a challenge under s 420A of the Corporations Act.  That important section generally requires a controller, in selling company property, to take all reasonable care to sell the property for not less than its market value.  It was claimed that in selling the property for $300,000 the receiver did not obtain the value: Warner v Ulysius International Trading Pty Ltd [2011] NSWSC 329.

In supporting the controllers conduct, the Judge was ‘satisfied that [he] took all reasonable care and steps to obtain the best price available in the circumstances and the time pressures on him’.

In particular, the Court took into account:

that a court should not assess a sale with the benefit of hindsight and without giving weight to any urgent need to realise wasting assets – it is necessary to consider the situation in which a receiver is placed at the time;

this is so particular if the assets require substantial ongoing expenses in order to preserve and maintain them while at the same time producing no significant revenue.

The controller had received only one offer to purchase the intellectual property, for $300,000 which he accepted after he had advertised for sale twice in the Australian Newspaper and had written to all known interested parties.  Evidence that the property was worth $3 million was not accepted by the Judge.

PATENT ATTORNEY LIENS

Of interest in that matter was a claim by a patent attorney to a lien for his unpaid fees, like that of a solicitor for a ‘fruits of the action’ lien.  The patent attorney, Mr Old, had provided professional services for the company and he had spent his own funds to maintain the registration of the patents.

He had a possessory lien over company documents pursuant to Regulation 20.53 of the Patents Regulation 1991 (Cth), under which a registered patent agent has the same right of lien over documents and property of a client as a solicitor.  Similar provisions are found in the legislation relating to registered designs (Designs Regulations 2004 – reg 11.16) and trade marks (Trade Marks Regulations 1995 – reg 20.16).

In claiming a fruits of action lien, Mr Old said he had taken steps to preserve the intellectual property and he was therefore entitled to enjoy the fruits of his efforts namely the intellectual property.  But the court found that such a lien does not exist if there is no fund that has been produced by the efforts of the patent attorney.  The registration, maintenance, renewal or procuring of defensive registration, maintenance, renewal or procuring of defensive registrations of patents by the attorney in respect intellectual property did not give him a lien – unlike a solicitor ‘there is no action no fund and no “fruit” to which the lien or claim could attach.”

Source: Michael Murray, ‘Insolvency Case Summaries’ (2011) 23(2) Australian Insolvency Journal 48, 50