Author Doug Constable on How to Work With Lawyers, Accountants, Trustees & Liquidators

By December 7, 2016Doug Constable

What To Do When You Can't Pay Your Debts Doug-Constable

Using the Professionals Appropriately

Consider the case of a young couple who came to see me.

The couple came over from Fiji and had a couple of children. He started importing used car parts and re-selling them on eBay. Eventually this trading provided him with full time employment. He had a friend who was a BAS agent and helped him organize his tax and gst affairs. The agent had said to him “I’ll handle all that.” So my client sent all his statements and the like to the agent. In the end he did not pay any tax. The ATO did an audit; not necessarily because they were suspicious about his trading but because they had some concerns about the agent from previous dealings.

#DougConstable #WorkwithLawyers #WorkwithAccountants #WorkwithTrustees #WorkwithLiquidators

My client actually never received any money but in the end the ATO assessed that he owed the ATO a small amount. But, because his returns were falsified they imposed a penalty and interest and he needed up owing over $60,000. He attempted to talk himself out of it with the ATO on the grounds that this was the entire agent’s doings but, as would b obvious to any sensible person, the business owner is responsible. The risk in using agents or advisers without understanding what they are doing on your behalf is that you as the business owner remain personally responsible and liable.

CAN I AFFORD AN ADVISER?

If you think a professional advice is expensive try using an amateur. Let me illustrate what I call the “lockout tactic”. It’s interesting how many businesses I have come across, where partnerships have seen one director lock out another. Ironically for all the times this happens, there is nowhere a business owner can turn when he finds himself in a lock out situation.

One particular client was a restaurant/bar owner who owned the business with a number of shareholders. The business was insolvent, mainly as a result of shareholder’s taking their friends, families and business associates to long, boozy $2000 lunches and dinners on a never ending tab. Not only was food and beverage consumed by shareholders as free for all, shareholders were dipping their hands in the till and pulling out $500 at a time.

When you have five shareholders this is a hell of a lot of cash walking out the door. Common sense would tell you that this situation was not sustainable, and eventually the business would go under. The owner contacted me in despair. I got involved and called in the tab, stopped the shareholder’s wining and dining, and restructured the business. One afternoon, the owner arrived at his premises, slipped the key into the lock, and found himself unable to get in. He called me in a panic. Why couldn’t he get into the premises? I’d experienced this with clients before. He’d been locked out. The locks had been changed.

We did a search on the company and discovered that the directorship had changed to one of the shareholders, and my client was no longer a director. He was completely shocked and contacted The Australian Securities & Investments Commission (ASIC), the Australian government corporate regulator, whose role is to enforce and regulate company and financial services laws to protect Australian consumers, investors and creditors.

The owner explained the circumstances to the public servant on the other end of the phone. While she seemed empathise, she was bewildered about the circumstances and had no answers or advice to give my client. She told him that she would arrange for someone to call him urgently. The business owner hung up and felt hopeful. Time ticked along, and at 5:45 pm there was still no return call, and likely to be no call. No call ever came. Not that day, or the next or ever.

My point is, don’t expect the legal system to be your friend. In the example of my client, he believed that ASIC as corporate regulators would be able to help him. The reality is vastly different. The public servant on the other end of the phone, with all her empathy, firstly had not come across this situation, so had no knowledge on dealing with it, and possibly, after hanging up that phone, she didn’t care. It was probably all too hard, and it was nearly time to go home. In any case, by the time action was taken the new director could have sold everything and grabbed the cash.

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