Transcript – Small Business Closure Advice
Episode 26 – What is bankruptcy and what does a trustee do?
James Flaherty
Hi, I’m James. I’m back with Cheryl. How are you, Cheryl?
Cheryl Stainsby
Good, James.
James Flaherty
Little episode of getting closure for your business and you. Cheryl, last time we talked about all the different sorts of jobs people do that you might encounter if your business is in a bit of trouble or you need to get things sorted out. So, bankruptcy. What’s a bankruptcy trustee do?
Cheryl Stainsby
So I think we may have discussed this in one of our other podcasts, but bankruptcy relates to personal. So bankruptcy may arise as a result of the liquidation of your company, but bankruptcy relates to personal debt, personal credit card debt, personal guarantees, money that you owe. personally.
James Flaherty
And as I understand, that’s different from what you see on TV from the US where like bankruptcies.
Cheryl Stainsby
Companies go into bankruptcy.
James Flaherty
Whereas here they would go into liquidation, which we can cover. So bankruptcies just myself, like I’ve got too much personal debt.
Cheryl Stainsby
That’s right. And as I said, that may be as a result of your company going into liquidation, you may now have half a dozen of your creditors pursuing you for personal guarantees.
James Flaherty
So like you’ve got a photocopier or you’ve bought a ute or something like that and they’ve got some down the back. We’ve talked about personal guarantees before. You’ve got to not only be careful about signing them, but if you are going to sign them, you’ve got to make sure you keep a track of them because you don’t want these people coming out of the woodworth if something goes sour. So bankruptcy, as you would topically see in your day, is not so much people have got credit cards. No, no, no. Credit cards.
Cheryl Stainsby
It can be any personal debt that is too too large for them to be able to pay. And now look, you know, what’s too large? Someone might have a million dollar debt and be able to pay it because they’ve got property that they can sell to pay a million dollar debt. I often work with people who maybe have a $20,000 or $30,000 debt. And sometimes I think to myself, you know, really, are we really going to put this person into bankruptcy for a $20,000 or $30,000 debt? But you think about it, if they’re on the dole, if they’re getting Centrelink, if they’re on a pension, if they’re a single mum with three or four kids, a single parent, $20,000 or $30,000 can be just totally…
James Flaherty
The mountain’s the same, depending on where you work, from which part of your perspective. There are things like Part 9 and Part 10 arrangements, and I think we’ve sort of delved with those a little bit before. That’s probably, if you need to think about that sort of stuff, that is a talk to, certainly a Part 10, they’re all part of the bankruptcy scheme. You can go to the Australian Financial Security Authority, They have a bunch of trustees who you can go and fill out the paperwork for.
Cheryl Stainsby
They do and certainly AFSA. AFSA is the name of the government organisation. It provides a great service for somebody. who is in dire straits and who can’t afford assistance. I’d still suggest that people speak to somebody before they necessarily go to the free government trustee. Sometimes, you know, there will be people who are in dire straits, but they may have a property. They may have some assets. that actually would be sold would be realized by a bankruptcy trustee if they went bankrupt. And so it may be that it would be better off for those people to actually talk to what we call a private bankruptcy trustee. That’s somebody that you would have a meeting with and you would be able to negotiate with them maybe to pay for the equity in the property. Maybe a family member would buy the equity in the house, but the bankruptcy trustee is an accountant who’s got a qualification that allows them to call themselves a bankruptcy trustee, there’s lots of study involved, and they will totally look after the personal insolvency side of things. They will assess your income, they will assess your assets, they will decide if there’s any opportunity for those assets to be sold to realise money for creditors. So once again, bankruptcy trustee personal, But I think it’s still good to speak to somebody first, whether that’s your accountant, your lawyer, a director’s advocate, to make sure that you’re using the right bankruptcy trustee before you file for bankruptcy.
James Flaherty
So I think it’s one of those things about getting advice from the right source. It’s understanding if you’ve got a bit of complexity to your personal affairs, then the free service may not necessarily be the right one for you if you’ve got a fair bit going on or you’ve come into this situation where a business might have failed and you’ve got some personal assets that are in the mix. So now, Cheryl, we’re going to cover off, you’ve got a new podcast series coming up where you’re going to talk to some of the people who you’ve helped. You’ll be talking to people who share their story in a bit more detail. So we’ll watch out for those and we’ll certainly give those a plug as we go along. Thanks for listening. A reminder that these podcasts are general in nature and do not constitute advice and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Transcript – Small Business Closure Advice
Episode 25 – Terms and Titles and where to get help
James Flaherty
Welcome back to the Getting Closure podcast. I’m James. I’m here with Cheryl. How are you doing, Cheryl?
Cheryl Stainsby
Yeah, I’m good. Thanks, James.
James Flaherty
Over the last many episodes, we’ve really kind of did a deep dive into the journey that you might go through if your business was in trouble or you had a bit of a crossroads. But one of the things that struck us as we were talking about this, it’s probably worthwhile actually doing a bit of a definition of terms, really, like we’ve talked about what a liquidator or a bankruptcy trustee might say or do, but what’s these people’s actual day job? Like they should take a step back. What does a bankruptcy trustee do? Because were you saying to me something about something happened to you just recently?
Cheryl Stainsby
Yeah, I was at the gym a couple of days ago and the guy that owns the gym, I was the only person there. We got into a bit of a conversation and he said to me, oh, Cheryl, what do you do? And I said, I’m a director’s advocate. I work with businesses that are in trouble and need to appoint a liquidator or a bankruptcy trustee. And he looked at me blankly and he sort of said, oh, what’s that? And I was a bit shocked because I thought, surely everybody knows. about liquidation and bankruptcy, but I guess sometimes, James, we just assume that people know.
James Flaherty
There’s a fair few places where you shouldn’t look for information on what these people do. So like TV, for example, like Hollywood and all that sort of stuff. might have a story of how process servers might process servers. And we’ve talked about that before on various episodes of how what you might see on television isn’t necessarily true. And there’s also another issue with, you know, there’s lots of stuff you might read on the internet, but there’s sort of different sorts of sites on the internet. You’ve got to be a bit careful about what you learn and read on Google. Perhaps in the next episode, we might talk about what a bankruptcy trustee does, because I think it’s really important for people to kind of So we’ll do that. And then also, what does a liquidator do? And I think the other thing that would be really handy to understand is what’s the difference between administration and liquidation and all these shuns that all go on. So all the shuns, if we did a shuns episode, and then also I think it’d be really sensible too for you to, could you actually say what a director’s advocate actually does? Now we’ve touched on that a little bit before, so there will be a little bit of crossover with previous episodes. Are you kind of happy to tackle those as a go to, how to, what to guide.
Cheryl Stainsby
I think it’s really important, probably not so much to understand the definition of these things, probably to understand who you would approach depending on what situation you’re in. And sometimes I suppose the terminology doesn’t really matter, but I just think it’s important that people do understand the difference between bankruptcy and liquidation and, you know, a bankruptcy trustee and a liquidator and a director’s advocate, a lawyer, what their different roles are. in assisting clients as they traverse through the pitfalls of insolvency, finalising their companies. Because as you say, there’s so much information out there. there’s your neighbour who’s got all the horror stories. Perhaps there’s some professionals who may have a vested interest in you engaging their services, who may give you an overly optimistic view of what the outcome might be. So I think it’s really important to make sure that you do your research and you talk to a number of different people to get a well-rounded view, understand. the definition of exactly what it is you’re doing, who you’re talking to, and make sure that’s something.
James Flaherty
Yeah, especially as we look at the messages for this episode, it’s important to understand what these people’s… role is, what they do, and what’s a good job as far as they’re concerned. How does that impact and relate to you?
Cheryl Stainsby
And look, to put it in simple terms, you know, if you go to the car salesman in the car yard, he’s going to tell you this beat up old car that you’re about to buy is the best thing since sliced bread, because he’s got a vested interest in seeing you buy that.
James Flaherty
That’s right. Be in the mind of why people are saying things to you.
Cheryl Stainsby
Exactly.
James Flaherty
Okay, well, that’s really interesting. Let’s crack on. So stay with us. Should we do bankrupt?
Cheryl Stainsby
Go do bankruptcy.
James Flaherty
A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Transcript – Small Business Closure Advice
Episode 24 – Just because its quiet
James Flaherty
It’s been very quiet. It’s been a little while now and nothing’s happened. But has it? Can it always be like that? Welcome back to the Getting Closure podcast. I’m with Cheryl Stainsby. Cheryl, how are you?
Cheryl Stainsby
I’m good, thanks, James. How are you?
James Flaherty
I’m all right now. You’ve got an interesting number of things you get called in life. So in your upcoming podcast series, which is really about bankruptcy and surviving bankruptcy, one of the people you interview calls you a disaster coach. So you’re a person who’s got lots of different experiences and so forth. Okay, we’ve been talking about disaster over the last little period of time and debts have got out of hand and you’ve got a wind-up application, but now nothing’s happened. It just seems like it’s all died down. Where are we up to and what do we need to watch out for?
Cheryl Stainsby
So the company’s in liquidation and there’s been an initial string of correspondence backwards and forwards from the liquidator, wanting books and records, wanting all the information, bank statements, copy of your zero or your myOB. And like you say, it’s gone quiet. Six months has gone by, maybe 12 months has gone by, you haven’t heard anything, and you think it’s all over. And you’re thinking, that’s it, I can move on with my life. And then suddenly, out of the blue, a letter comes. And it might be a letter actually making a demand on you, asking you to repay $495,000 in seven days into the Liquidators Trust account as a result of a director’s loan or as a result of insolvent trading. And of course you look at that and you freak out because you don’t have that sort of money and you certainly don’t have access to it in seven days.
James Flaherty
Hang on, what just happened? I thought I was in the clear. And in fact, the process goes on for quite some time. Things can…
Cheryl Stainsby
It does go on for quite some time. And look, you know, without sort of pointing fingers or being critical at all, what a lot of people don’t understand is they think their company is the uppermost thing in everybody’s mind. But the reality is that… liquidators have a lot of work on the go at one time. And sometimes, they might take your appointment and then half a dozen other jobs come in which are a little bit more urgent. they take a priority and sometimes then they’ll jump back on, on your job, in between jobs, when they’ve got a quiet moment or if, when time allows them to do so. sometimes it can be 12 months, it can be 18 months. before they actually get a chance to look deeply into the company’s books and records. and then make these sort of claims against the director. And I guess a lot of people didn’t really see a demand for a director’s loan coming and they certainly don’t understand what insolvent trading is. So these are very stressful times for people when they suddenly receive these letters out of the blue.
James Flaherty
And if we’re using terms that don’t ring a bell, we’ve got a bunch of different podcasts you should dive into on this series to sort of find out what is insolvent trading and what about director’s guarantees. I mean, what are things we’ve talked about is with the house prices all going up, it’s fantastic. But if you had no money when the business went into liquidation but owned your home potentially, but it was up in debt up to the eyeballs then. It may not be now. So there’s another risk that you face. There’s this kind of sword of Damocles hanging over the head of the director who thought it had been done and dusted in the liquidation but maybe had some assets or maybe had some things that they walked away with. It doesn’t mean… They’re always going to be there. So is that an argument for get some advice.
Cheryl Stainsby
Absolutely. And James, I think you’ve just touched on a really interesting point because as we all know, particularly in Brisbane in the last 12 months, property prices have skyrocketed. And we’ve actually seen a number of liquidators who perhaps hadn’t really bothered to pursue a director for insolvent trading or a director’s loan because they knew from the information supplied to them at the time the company went into liquidation that there was no in the director’s property. But all of a sudden now they are probably getting a valuation done on the director’s property and have discovered now there’s maybe $200,000 equity in there. So in fact, perhaps the director can afford to come to an agreement, to come to a settlement, to pay some money.
James Flaherty
That’s the point, isn’t it? doesn’t mean you lose your house automatically if so facto. What it means is you’ve got to be back on the front foot and have a conversation or have a negotiation to come to an agreement. to help effectively give a little bit more of the wealth that you now have back to the creditors who were out of pocket when the business was wound up. And so again, it’s about getting good advice what to do in this situation.
Cheryl Stainsby
Absolutely. And once again, we can’t stress that you’ve got to be proactive. If you stick your head in the sand and you do nothing, then the liquidator’s within their rights to issue bankruptcy proceedings against you. But the reality is that if you’re on the front foot and you talk to the liquidator, you can nearly Really always negotiate a settlement with the liquidator so you don’t lose your house.
James Flaherty
Oh, thanks, Cheryl. Always good to end on a helpful and optimistic note.
Cheryl Stainsby
Thank you.
James Flaherty
A reminder that these podcasts are general in nature and do not constitute advice and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Small Business Closure Advice – Transcript
Episode 23 – Back on the front foot with a wind up application
James Flaherty
So we wondered about calling this episode Don’t Try This at Home. But anyway, welcome back to Getting Closure. I’m James, I’m with Cheryl. How are you Cheryl?
Cheryl Stainsby
I’m good, thanks James. How are you?
James Flaherty
Yeah, not bad, not bad. So look, the real idea of this one is we’ve been talking over the last few episodes about different steps towards the end. And then finally at last, an application for wind-up comes and you hit it. And we’re going to talk about the don’t try this at home is I’m not going to do anything about it. I’m going to let the application for wind up wash over me. So just tell me exactly what I’ve done, what’s happened to me and where I’m going to go from here. If I’ve said, okay, application for wind up liquidator appointed, I’m just going to let it happen. What happens?
Cheryl Stainsby
Well, first of all, for my position, I never like to be out of control, never like to have someone else in control. I believe you should be proactive and you should always be in control. But unfortunately, there are people who put their head in the sand who aren’t proactive in this instance. And we often even hear from people perhaps 18 months or two years later who’ve been through this process and were told by their advisor, Let it go to the keeper. Let somebody else wind it up. Let a court-appointed liquidator take over. So what happens when a court-appointed liquidator takes over. On the date that the wind-up application is heard in court, generally speaking, pretty soon after that, sometimes within hours, sometimes within 24 hours, you’ll get a phone call or correspondence from the appointed liquidator, basically asking you questions about your company. If your company is still trading, then they will more than likely turn up on the doorstep of the company and they will want to seize your books and records. they might want to seize plant and equipment, they will certainly be wanting to shut down your business.
James Flaherty
Right. So if you’ve just sat there quietly, just ignoring it and hoping it’ll go away, if the business is still operating, as you said, you should expect people on the doorstep coming to either take stuff, take control of things, ask you for the keys, all sorts of stuff like that.
Cheryl Stainsby
That’s right. Once again, my suggestion is that if you have let it go this far, then at that point, you probably need advice as well. Are premises, for example, on a property that’s owned by yourself or by a different company. Does the liquidator actually have a right to enter? your premises. The plant and equipment, is it actually owned by a different entity? Do they have the right to seize that plant and equipment? There’s a lot of ifs and ands, but if you don’t have any advice, then sometimes you may let a liquidator into premises where they’re legally not allowed to. You may let them take plant and equipment that they’re legally not entitled to.
James Flaherty
So isn’t this the point that you make quite a bit? It’s just because someone who has an authority of some kind says something doesn’t mean that you don’t have the right to challenge it. So if someone turns up, but you have been advised that they don’t have the right to enter, you have the right to say to that official looking person, hey, you don’t have the right to be here.
Cheryl Stainsby
You do have that right. Now you certainly don’t have the right to refuse to hand over books and records of the company and company assets. But as we know, a lot of people don’t really understand understand often the difference between company assets, personal assets, if their accountant has maybe set up a trust that owns assets, sometimes directors don’t understand the difference between those different entities and who exactly owns what. So once again, I think if you choose not to take control, if you choose to just allow things to happen, then sometimes you can be severely disadvantaged by the fact that you don’t don’t actually know what your rights are?
James Flaherty
It’s right, so you’re saying in a sense there’s a whole lot of stuff that could happen to you quite quickly that could actually be quite detrimental to your final position because you’ve let it go. You’ve actually let stuff go you didn’t need to let go. So in a sense, it’s the old situation of pretending that things aren’t happening sometimes makes it worse than facing them. And we often say that in these series, it’s better to try and front up. But at least if you’ve got some advice, you know what to expect. But also, if you take a bit of control, things may not be as bad as they seem if you take a proactive approach to solving what’s going on to you.
Cheryl Stainsby
Exactly.
James Flaherty
Great. I think we better keep on going. So really, we’re only just at the beginning of what’s happen when you’ve gone down this path. Let’s keep going. A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Transcript – Small Business Closure Advice
Episode 22 – Windup Application
James Flaherty
So we wondered about calling this episode Don’t Try This at Home. But anyway, welcome back to Getting Closure. I’m James, I’m with Cheryl. How are you Cheryl?
Cheryl Stainsby
I’m good, thanks James. How are you?
James Flaherty
Yeah, not bad, not bad. So look, the real idea of this one is we’ve been talking over the last few episodes about different steps towards the end. And then finally at last, an application for wind-up comes and you hit it. And we’re going to talk about the don’t try this at home is I’m not going to do anything about it. I’m going to let the application for wind up wash over me. So just tell me exactly what I’ve done, what’s happened to me and where I’m going to go from here. If I’ve said, okay, application for wind up liquidator appointed, I’m just going to let it happen. What happens?
Cheryl Stainsby
Well, first of all, for my position, I never like to be out of control, never like to have someone else in control. I believe you should be proactive and you should always be in control. But unfortunately, there are people who put their head in the sand who aren’t proactive in this instance. And we often even hear from people perhaps 18 months or two years later who’ve been through this process and were told by their advisor, Let it go to the keeper. Let somebody else wind it up. Let a court-appointed liquidator take over. So what happens when a court-appointed liquidator takes over. On the date that the wind-up application is heard in court, generally speaking, pretty soon after that, sometimes within hours, sometimes within 24 hours, you’ll get a phone call or correspondence from the appointed liquidator, basically asking you questions about your company. If your company is still trading, then they will more than likely turn up on the doorstep of the company and they will want to seize your books and records. they might want to seize plant and equipment, they will certainly be wanting to shut down your business.
James Flaherty
Right. So if you’ve just sat there quietly, just ignoring it and hoping it’ll go away, if the business is still operating, as you said, you should expect people on the doorstep coming to either take stuff, take control of things, ask you for the keys, all sorts of stuff like that.
Cheryl Stainsby
That’s right. Once again, my suggestion is that if you have let it go this far, then at that point, you probably need advice as well. Are premises, for example, on a property that’s owned by yourself or by a different company. Does the liquidator actually have a right to enter? your premises. The plant and equipment, is it actually owned by a different entity? Do they have the right to seize that plant and equipment? There’s a lot of ifs and ands, but if you don’t have any advice, then sometimes you may let a liquidator into premises where they’re legally not allowed to. You may let them take plant and equipment that they’re legally not entitled to.
James Flaherty
So isn’t this the point that you make quite a bit? It’s just because someone who has an authority of some kind says something doesn’t mean that you don’t have the right to challenge it. So if someone turns up, but you have been advised that they don’t have the right to enter, you have the right to say to that official looking person, hey, you don’t have the right to be here.
Cheryl Stainsby
You do have that right. Now you certainly don’t have the right to refuse to hand over books and records of the company and company assets. But as we know, a lot of people don’t really understand understand often the difference between company assets, personal assets, if their accountant has maybe set up a trust that owns assets, sometimes directors don’t understand the difference between those different entities and who exactly owns what. So once again, I think if you choose not to take control, if you choose to just allow things to happen, then sometimes you can be severely disadvantaged by the fact that you don’t don’t actually know what your rights are?
James Flaherty
It’s right, so you’re saying in a sense there’s a whole lot of stuff that could happen to you quite quickly that could actually be quite detrimental to your final position because you’ve let it go. You’ve actually let stuff go you didn’t need to let go. So in a sense, it’s the old situation of pretending that things aren’t happening sometimes makes it worse than facing them. And we often say that in these series, it’s better to try and front up. But at least if you’ve got some advice, you know what to expect. But also, if you take a bit of control, things may not be as bad as they seem if you take a proactive approach to solving what’s going on to you.
Cheryl Stainsby
Exactly.
James Flaherty
Great. I think we better keep on going. So really, we’re only just at the beginning of what’s happen when you’ve gone down this path. Let’s keep going. A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Transcript – Small Business Closure Advice
Episode 21 – Windup Application and Ambulance Chasers
James Flaherty
Welcome back. We’ve been talking about debts that you haven’t paid. What do you expect when people start chasing them? Now, we’ve talked about companies that chase debt, and last time we talked about the ATO. So, okay, now there’s a situation where we’ve got money outstanding to somebody, we’ve had the letters, we’ve had the phone calls, we’ve even had from the ATO a threat saying they’re going to take legal action. So what happens next?
Cheryl Stainsby
So James, it depends whether it’s the tax department or whether perhaps it’s a private creditor that you owe money to.
James Flaherty
Right.
Cheryl Stainsby
The tax department will often, they will issue a statutory demand, whereas maybe a private company, a supplier that you owe money to, will take a different course of action. They might go to QCAT.
James Flaherty
Or any other interstate.
Cheryl Stainsby
They might issue a statement of claim, which is basically a court document. It’s lodged with the court and it lists… their grievances, it lists how much they believe you owe. And the same with a statement of claim that’s lodged in the courts, or if you have to go to QCAT, you get the ability to argue your case. If someone issues a statement of claim against you, can issue a defence stating why you don’t believe that you owe that money.
James Flaherty
And you go to the Administrative Claims Tribunal in that situation and you can have a lawyer or you could go yourself or they, depending on the amount of money.
Cheryl Stainsby
That’s right.
James Flaherty
You want to be fairly careful about that. So it’s not quite the nuclear option just yet. We’re still talking about it’s, you know, but that would be still, that would still be on the record, wouldn’t it? If someone’s lodged a claim, it would be on the court registry.
Cheryl Stainsby
Well, if they lodge a statement of claim against you and you don’t defend it, then… they can go back to the court and get a default judgment against you. So that means that you haven’t defended it, you haven’t argued the point, you’ve basically said, you’ve basically admitted that you owe the money.
James Flaherty
So if you don’t show up or you ignore it, that’s construed to be, okay, well that’s acceptance. That’s right. Silence is acceptance. So hang on, how do I get one of these?
Cheryl Stainsby
So a statement of claim will be served.
James Flaherty
On you, like in the movies where the guy… Knocks on the door and passes an envelope through, sort of a bit like that, like a process server comes and.
Cheryl Stainsby
Gets you and tries to serve you. A lot of people think that by dodging a process server… that they’ll never be held accountable.
James Flaherty
That’s just movie stuff though, isn’t it?
Cheryl Stainsby
Well, look, it is, it’ll certainly delay the process for a little while, but the reality is that most creditors these days can apply to the courts to get what we call a substituted service. So then the process goes on and essentially you don’t know what’s happening because you haven’t actually accepted service, you haven’t seen the document, so they’ve gone about it. I’m not going to say behind your back, but basically without you.
James Flaherty
The wheels keep turning.
Cheryl Stainsby
Yeah, the wheels keep turning.
James Flaherty
And then so this is a real watch out for people who don’t know or haven’t really followed, closely followed where their registered address of their business is. Because if you’ve changed accountants and all that sort of stuff, it’s pretty important to keep all that stuff up to date because they could be accepted in a place that you don’t know about and the world just keep turning, don’t they?
Cheryl Stainsby
Well, that’s true. Quite often these documents are served on the company’s registered address.
James Flaherty
Which is often an accountant, but not always.
Cheryl Stainsby
And it can be posted to the company’s registered address. So it could be the accountant. It could be an office that you vacated three years ago. And if you haven’t updated your current address on the ASIC company search, then these documents may be sent to the company’s registered address, which actually is no longer valid. And once again, you don’t know what’s going on.
James Flaherty
So I think what we’ve said is that, so I think the wheels have started turning now. There is a legal process that’s occurred. You can ignore it at your risk. You’re certainly starting to me, depending on the amount of money, sounding like time to get advice, if you haven’t already, and certainly trying to engage. Okay, well let’s see what happens next. Thanks, Cheryl. A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Transcript – Small Business Closure Advice
Episode 20 – Watch our for the Creditor’s Statutory Demand
James Flaherty
You’ve ignored the phone calls, you’ve not opened the letters, you’ve even ignored a statement of claim. So what’s going to happen to you next? And of course, don’t forget that some of those little things that we’ve just talked about then can be skipped and you can go straight on to…
Cheryl Stainsby
Statutory demand.
James Flaherty
So thanks Cheryl, I’m James. Tell us what happens with a statutory demand.
Cheryl Stainsby
So a statutory demand Basically, once again, is a legal letter sending out the amount of money that you owe. And even at this late stage, you still have the ability to have that set aside if you disagree with it. But I guess…
James Flaherty
But you’ve got to go, like it’s at court. This is kind of, this is serious. This is in court. There’s lawyers involved typically at this sort of situation. The threshold for these went up just during COVID. Because I’ll remember last year there was a, there was a whole, they pushed back the whole period for how long have you responded to this? Well, it’s gone kind of back to the old days.
Cheryl Stainsby
It has.
James Flaherty
21 days.
Cheryl Stainsby
21 days, yep.
James Flaherty
And if you ignore it, you’ll go back to that default judgment you’re talking about before. So if you tried to ignore one of these, what happens?
Cheryl Stainsby
So if you ignore one of these, the creditor can go back to court and wind up your company. Right. So you’ve got 21 days essentially to do something about this.
James Flaherty
Right.
Cheryl Stainsby
Now during this period, as I said, you can have it set aside if you disagree with it, but this is not just a matter of filling in a form anymore. This is a matter of engaging a lawyer to go to court and argue your case. You can once again ring the creditor and enter into a payment arrangement. But the other option that you still have at this stage, if you really believe that you don’t have the ability to pay, if you don’t believe that you are going to be able to pay and you think that your company is probably not doing too well is at this stage you can still appoint your own liquidator or your own administrator.
James Flaherty
Right, so you can sort of make the decision to fall on your own sword before that decision is taken out of your hands.
Cheryl Stainsby
That’s right, yeah. And at this stage, from the date that you receive this, you’ve got 21 days to do that. Once the 21 days expires, at that stage, Particularly if they’re an aggressive creditor, you can assume that they’re getting a court date to get a wind-up application. and once that’s issued, then control essentially is taken out of your office.
James Flaherty
Yeah, it’s all over, pretty much. It goes back to a lot of that thinking that we’ve been sharing over the previous episodes is try and get onto the front foot. So in this scenario, you’ve either ignored it or you’ve vehemently… refused to pay. In this situation, the tax office might, the tax office might have set, hasn’t sent you all of the statements of claim and things like that. They’ve given you phone calls and emails and texts. They’ve gone to a statutory demand. So it’s pretty serious. It’s going to be on the record. You can go to court to get it set aside, but you need to actually go to the trouble of having it set aside. If you do not do that, then it’s in the hands of the creditor to they could then go to court and make an application to wind you up.
Cheryl Stainsby
To wind up the company, that’s right, yeah.
James Flaherty
So this is where it gets really important about some of the things about, oh, we’ve talked about it, all the way back to previous episodes about denial and fighting and hitting your head in your sand. If I look at what’s happened after the COVID scenario, More of these letters are being sent out, more of these statutory demands are now being issued, and that seems to have now forced people to act. Lawyers are telling me and telling you that these are now being issued now.
Cheryl Stainsby
No, I agree with you, James. I think there’s a lot of creditors who haven’t had the ability to collect money during COVID. And now they’re saying to their lawyers, you know what, we’re not interested in mucking around anymore. Let’s issue a creditor’s statutory demand. Let’s get something happening here. If these people won’t pay us, let’s wind up their companies. So these need to be taken seriously. But let’s also go back to the registered address of the company. Because once again, if the registered address for your company is not correct, then these demands, these stat demands can be served on an incorrect address and you may not know anything about them. You may not know that they are being served.
James Flaherty
What do I do then?
Cheryl Stainsby
The first thing you know is that you probably get a lot of people ringing you telling you that your company’s about to be wound up or maybe a letter from a liquidator telling you that he’s been appointed to wind up your company.
James Flaherty
That’s a whole can of worms. Let’s keep going. A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal, or counselling advice.
Transcript – Small Business Closure
Episode 19 – Statements of Claim
James Flaherty
Welcome back. We’ve been talking about debts that you haven’t paid. What do you expect when people start chasing them? Now, we’ve talked about companies that chase debt, and last time we talked about the ATO. So, okay, now there’s a situation where we’ve got money outstanding to somebody, we’ve had the letters, we’ve had the phone calls, we’ve even had from the ATO a threat saying they’re going to take legal action. So what happens next?
Cheryl Stainsby
So James, it depends whether it’s the tax department or whether perhaps it’s a private creditor that you owe money to.
James Flaherty
Right.
Cheryl Stainsby
The tax department will often, they will issue a statutory demand, whereas maybe a private company, a supplier that you owe money to, will take a different course of action. They might go to QCAT.
James Flaherty
Or any other interstate.
Cheryl Stainsby
They might issue a statement of claim, which is basically a court document. It’s lodged with the court and it lists… their grievances, it lists how much they believe you owe. And the same with a statement of claim that’s lodged in the courts, or if you have to go to QCAT, you get the ability to argue your case. If someone issues a statement of claim against you, can issue a defence stating why you don’t believe that you owe that money.
James Flaherty
And you go to the Administrative Claims Tribunal in that situation and you can have a lawyer or you could go yourself or they, depending on the amount of money.
Cheryl Stainsby
That’s right.
James Flaherty
You want to be fairly careful about that. So it’s not quite the nuclear option just yet. We’re still talking about it’s, you know, but that would be still, that would still be on the record, wouldn’t it? If someone’s lodged a claim, it would be on the court registry.
Cheryl Stainsby
Well, if they lodge a statement of claim against you and you don’t defend it, then… they can go back to the court and get a default judgment against you. So that means that you haven’t defended it, you haven’t argued the point, you’ve basically said, you’ve basically admitted that you owe the money.
James Flaherty
So if you don’t show up or you ignore it, that’s construed to be, okay, well that’s acceptance. That’s right. Silence is acceptance. So hang on, how do I get one of these?
Cheryl Stainsby
So a statement of claim will be served.
James Flaherty
On you, like in the movies where the guy… Knocks on the door and passes an envelope through, sort of a bit like that, like a process server comes and.
Cheryl Stainsby
Gets you and tries to serve you. A lot of people think that by dodging a process server… that they’ll never be held accountable.
James Flaherty
That’s just movie stuff though, isn’t it?
Cheryl Stainsby
Well, look, it is, it’ll certainly delay the process for a little while, but the reality is that most creditors these days can apply to the courts to get what we call a substituted service. So then the process goes on and essentially you don’t know what’s happening because you haven’t actually accepted service, you haven’t seen the document, so they’ve gone about it. I’m not going to say behind your back, but basically without you.
James Flaherty
The wheels keep turning.
Cheryl Stainsby
Yeah, the wheels keep turning.
James Flaherty
And then so this is a real watch out for people who don’t know or haven’t really followed, closely followed where their registered address of their business is. Because if you’ve changed accountants and all that sort of stuff, it’s pretty important to keep all that stuff up to date because they could be accepted in a place that you don’t know about and the world just keep turning, don’t they?
Cheryl Stainsby
Well, that’s true. Quite often these documents are served on the company’s registered address.
James Flaherty
Which is often an accountant, but not always.
Cheryl Stainsby
And it can be posted to the company’s registered address. So it could be the accountant. It could be an office that you vacated three years ago. And if you haven’t updated your current address on the ASIC company search, then these documents may be sent to the company’s registered address, which actually is no longer valid. And once again, you don’t know what’s going on.
James Flaherty
So I think what we’ve said is that, so I think the wheels have started turning now. There is a legal process that’s occurred. You can ignore it at your risk. You’re certainly starting to me, depending on the amount of money, sounding like time to get advice, if you haven’t already, and certainly trying to engage. Okay, well let’s see what happens next. Thanks, Cheryl. A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Transcript – Small Business Closure Advice
Episode 18 – What if my business owes money to the ATO?
James Flaherty
Welcome back to the Getting Closure Podcast. I’m James, I’m with Cheryl here today. Hi Cheryl, how are you going?
Cheryl Stainsby
I’m really well, thanks James. What about you?
James Flaherty
Doing really well. Look, we’ve had some good feedback over the series that we’ve been running about, all the different things you’ve got to think about in terms of what you owe and when you owe it. One of the questions that’s come back is about business kind of structure. So we’ve talked about if you’ve got a company or things like that, and people have sort of said to me, but look, I’ve just got an ABN. So they’re like a sole trader, aren’t they? Are there any, so I suppose what we should do is perhaps spend these next few apps talking about structures and the benefits. Okay then, so what’s the structure of, what’s the benefit of the structure of being a sole trader, an ABN?
Cheryl Stainsby
So a sole trader essentially means that you’re trading in your own right. You’re recurring debt in your name, you’re earning income in your name, and all the tax is being paid by you in your name. And as most people would be aware, there are marginal tax rates which go up. quite dramatically when you earn over a certain amount of money. So potentially, you have the disadvantage of paying a much higher tax rate if you earn a lot of money in a sole trader entity. The good thing about companies is that the company tax rate is lower.
James Flaherty
Gotcha. So a lot of people say that company sounds a little bit hard. clean houses on the week, a few days a week, or I do a bit of stuff on the internet. So like I buy and sell a few things online. So I want to keep it simple. So is there some benefit to say, yeah, okay, the money, it’s a real money comes in, money comes out kind of. I think it is, James.
Cheryl Stainsby
I think if you’re, if you’ve got a bit of a hobby type business, and you’re possibly earning under the threshold where you have to pay GST, which is 80 to 100,000, then possibly working as a sole trader is right for you. But I think if you’ve got to a point where your income is over that amount, if you’re starting to incur debts to suppliers, And I think you really seriously need to think about whether you should be operating as a company.
James Flaherty
Right. So what about if you employ people? You’re thinking like if you start… I’ve told you in the past about… various people have approached the Solvers with businesses that, they’re just in their own name and the money all comes into their bank account and then they pay everybody out of their bank account. So that seems to me as a real good example of do not try this at home because that seems to be fraught with danger, that kind of complexity out of someone’s bank account. Is that right?
Cheryl Stainsby
My experience with a lot of the clients that I deal with is that a lot of people do have trouble differentiating between what is their money and what is their business money. And I think it becomes even more difficult when you operate as a sole trader. It often becomes difficult for people to understand that you’ve got to put aside that money to pay the group tax on the wages or the superannuation or the GST or in fact the money that you need to pay your suppliers. Whereas I think sometimes if you’re trading via a company structure, it’s sometimes a little bit easier to be able to differentiate between all of those separate, you know, bills, bank accounts.
James Flaherty
What goes where and what comes where. So, but I mean, a lot of people say, yeah, it’s so much simpler. I’m not very big and do you think you ever find in your world that some people start off small and get big but never really got back to actually sorting all those things out? Do you see that very often or is it?
Cheryl Stainsby
Absolutely and quite often they’re the people that we often have to put into personal bankruptcy. One of the downsides of running a business as a sole trader is that you are responsible for 100% of the debt. Now I’m not saying that anybody sets out in business to fail or anybody sets out to not want to pay people. But the reality is that the Corporations Act was put there to give business owners who are entrepreneurial, who want to take a chance, who want to have a go, the ability to have a measure of immunity, provided they do the right thing, provided they don’t do anything fraudulent, provided they don’t trade insolvently. Because as we all know from COVID, things happen that are out of your control. And if you find you’re in trouble, but you’re operating via a company and you’ve done everything right, then there is a measure of immunity for the director in that case.
James Flaherty
Well, let’s keep going. Thanks for that one, Cheryl. So maybe not to sole trader. Okay, thanks. A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think Though that some of the issues raised might apply to you, should seek qualified financial, legal, or counselling advice.
Transcript – Small Business Closure Advice
Episode 17 – What to expect if my business hasn’t paid a debt
James Flaherty
Welcome back to the Getting Closure podcast. I’m James, I’m here with Cheryl Stainsby, who’s the director of Your Director’s Advocate. Hi Cheryl, how you doing?
Cheryl Stainsby
I’m good, thanks. James, how are you?
James Flaherty
Yeah, not too bad, Cheryl. Look, a question though that comes to mind is, say you’ve got a company and you’ve got a debt. and you’ve not paid it. Now maybe you haven’t got quite enough money or you don’t agree on the amount or there’s been a dispute. What kind of, let’s talk about like the communication and the process that can, I’m the person who owes the debt, what can I expect to start coming at me the longer the debt’s outstanding?
Cheryl Stainsby
James, I guess there’s a number of ways that people can communicate with you the fact that you owe them money. And I guess probably one of the initial ways that people would communicate that is they might send you an e-mail telling you that you haven’t paid your invoice. If you ignore that e-mail, then maybe they will send you some sort of an official letter.
James Flaherty
Is it an official looking letter or is it on a credit, like is it like a credit agency letter or on letterhead saying you owe us money? You’re saying you’d expect anything that says, looks official, that says pay me money?
Cheryl Stainsby
Yeah, you might. They might have some templates that look like debt collection letters. They might engage a debt collection agency. They might engage a lawyer to send you a letter of demand. So a letter of demand is the first step. That’s basically saying to us, you owe us money. And if you dispute that fact, if you don’t agree with them, then it’s usually a matter of writing back or ringing them and saying, look, no, I’ve paid it. Here’s where I’ve paid it. No, I don’t agree with you. Can I enter into a payment plan? if you don’t have enough money to pay that debt, and you ignore that letter, then generally speaking, you could expect that creditor may take things to the next level.
James Flaherty
So why don’t we sort of do this kind of step by step? So what we could do today is we’ll talk about letters of like the letters of demand and phone calls and things like that. So in your experience, what are people sort of seeing and getting before things really start, the screws start to tighten? Say, you’ve said there’s a major credit card company, you’re saying that they can phone you. If you ignore them, they can phone you as much as they like, can’t they? They can phone you heaps.
Cheryl Stainsby
They can, and quite often credit card companies, banks, even some telcos like Telstra, they’ll outsource their debt collection and they’ll outsource debt collection to people maybe in overseas offshore centres and some of those offshore centres will call you 10, 20 times a day and anybody that’s had a debt with a credit card will often have experienced that. Under the regulations, if you don’t answer their call, they can call you as many times a day as they want to. But if you answer their call, then it’s my understanding that they’re only allowed to call you three times a week.
James Flaherty
Right, so there’s a benefit to it. So ignoring it, the whole thing about ignoring it and going away, which is often, we often talk about in these podcasts, is another reason if you pretend it doesn’t exist, that gives an opportunity for them to keep hassling you. They can send you letters, you’re saying. And then some of these letters can look quite official, or they can say some pretty sort of, you know, kind of intimidating sort of things. So, threatening your credit rating and all that sort of stuff. So, okay, I’m the director of a business that owes money. I’ve started getting the phone calls and I’ve now received a fairly official looking nasty sort of letter. So where’s that in the scheme of things? And we’ll talk about this in successive episodes. So where am I now? What do I do now? I’ve just got a letter of demand, I’ve got some phone calls. Am I speaking? Do I get advice? What do I do? What’s my steps?
Cheryl Stainsby
I think it depends on what your ability is to pay the debt. If you have the ability to pay the debt, if you believe that you can pay the debt, then you should ring that creditor and you should enter into a payment arrangement. If you don’t believe that you can pay the debt, then I think we’re getting into the area now of are you trading insolvently and now you need to seek some advice. You need to talk to your accountant, maybe your lawyer. You need to seek some advice as to what your next steps are.
James Flaherty
Yeah, and mindful of the fact that some of these letters in the initial phases might sound threatening, but some of them have got a bit more bark than bite in the initial phase. That’s right. But we’ll go on to the next episode where things can, their screws can slowly tighten. Okay, well stay with us and we’ll go on to what happens next. A reminder that these podcasts are general in nature and do not constitute advice and they don’t take into account your personal circumstances. So if you think though that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Transcript – Small Business Closure Advice
Episode 16 – Family and other trusts for business
James Flaherty
Welcome back to Getting Closure. I’m James. So do you trust me, Cheryl, do you reckon?
Cheryl Stainsby
Not real keen on trusts.
James Flaherty
Are you? Let’s talk about trusts. So it’s not trust as in, if Cheryl loans me 10 bucks, Will she ever get it back? And I’d probably suggest she shouldn’t. But anyway, the point is that this is more about sometimes when you pay a bill, especially in building industries, you might have the Fred Bloggs Proprietary Limited as trustee of the Fred Bloggs Family Trust. So we talked the other day about sole traders. trading in my own name. Next one was, okay, I’ll get a company. I’ll be James’s Painting Proprietary Limited. But then if I go for the, if I then say I have Cheryl Stainsby Proprietary Limited as trustee of the Stainsby Family Trust, what am I seeing there, Cheryl? And is there any particular advantage? And of course, we’re not straying into financial advice because we don’t do that. What is that all even about, Cheryl, in your world?
Cheryl Stainsby
Trusts are probably one of the most misunderstood structures out there in the universe. They are used for a variety of reasons. They’re used for tax effectiveness. They can be used for asset protection. They can be used after somebody’s passed away. It’s a testamentary trust to distribute income to people. There’s a number of reasons that trusts can be used and trading, a lot of people use them to trade their business in. My advice to anybody would be not to look at operating in a trust unless you get advice from your accountant to do so. Some of the tax benefits that trusts used to have aren’t as effective these days. So My advice is only if your accountant advises you to trade in a trust, would you do so? And you’d be wanting to say to them, What are the benefits to me of trading in a trust? I see a lot of clients who say to me, Oh, but my accountant told me that I was totally protected trading in a trust. And that’s often simply not the case.
James Flaherty
Yeah, okay. So as a structure of protection, Maybe not.
Cheryl Stainsby
Look, once again, a trust is only good protection if you don’t sign personal guarantees, if you pay your taxes. tax, if you do everything correctly. But as we talked about before, James, some trustees have a company as the trustee, and other companies, sorry, other trusts have the person as the trustee. And if you’re operating in a trust that you are the trustee of, then pretty much you’re operating as a sole trader.
James Flaherty
Yeah, okay, wow, okay. And then see a sort of almost going all the way back to… where you were.
Cheryl Stainsby
That’s right.
James Flaherty
Yeah, wow.
Cheryl Stainsby
So trusts are very misunderstood and I think if you’re even thinking about operating as a trust, you need to get really good advice from your accountant, from your lawyer, from your financial advisor as to whether or not a trust structure is beneficial for you.
James Flaherty
Yeah, because when things go wrong, one of the members of the Insolve panel had said to me a few years ago that tax structures are sometimes the complete opposite of what you want for asset protection structures. And they’re two different jobs. So one can do one job really well and not the other. So it’s really about quite savvy advice about what you’re trying to achieve. And so we talked a bit last week about, okay, business isn’t easy. If you’re going to go into small business, you need to protect yourself. But you also need to say, do I really have a business? If I don’t have a business that can afford to pay the compliance costs that are being run properly to make sure you pay your taxes and pay your staff and do all your lodgements and all that sort of stuff and perhaps have a bookkeeper, then maybe you don’t really have a business. But on the other side of the coin, you’re saying if an accountant says you must have this structure, you are right to say, well, what are the risks and disadvantages or risks, what are the benefits and risks that of this particular extra thing that you’re saying you want me to do. What’s it doing for me and how does it protect me if I get sick or…
Cheryl Stainsby
Absolutely. One of the most disheartening things that I see is that a client… will come to see us and they’ll have this fabulous structure that’s been set up by their accountant, but they don’t understand it. And they don’t understand how maybe two or three entities work together, relate to each other. And if you don’t understand how your structure operates, how can you operate effectively in it?
James Flaherty
That’s great. Yeah, okay, good point. Thanks, Cheryl. A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal, or counselling advice.
Transcript– Small Business Closure Advice
Transcript– Small Business Closure Advice
Episode 14 – What could possibly go wrong?
James Flaherty
Welcome back to the Getting Closure Podcast. I’m James, I’m with Cheryl here today. Hi Cheryl, how are you going?
Cheryl Stainsby
I’m really well, thanks James. What about you?
James Flaherty
Doing really well. Look, we’ve had some good feedback over the series that we’ve been running about, all the different things you’ve got to think about in terms of what you owe and when you owe it. One of the questions that’s come back is about business kind of structure. So we’ve talked about if you’ve got a company or things like that, and people have sort of said to me, but look, I’ve just got an ABN. So they’re like a sole trader, aren’t they? Are there any, so I suppose what we should do is perhaps spend these next few apps talking about structures and the benefits. Okay then, so what’s the structure of, what’s the benefit of the structure of being a sole trader, an ABN?
Cheryl Stainsby
So a sole trader essentially means that you’re trading in your own right. You’re recurring debt in your name, you’re earning income in your name, and all the tax is being paid by you in your name. And as most people would be aware, there are marginal tax rates which go up. quite dramatically when you earn over a certain amount of money. So potentially, you have the disadvantage of paying a much higher tax rate if you earn a lot of money in a sole trader entity. The good thing about companies is that the company tax rate is lower.
James Flaherty
Gotcha. So a lot of people say that company sounds a little bit hard. clean houses on the week, a few days a week, or I do a bit of stuff on the internet. So like I buy and sell a few things online. So I want to keep it simple. So is there some benefit to say, yeah, okay, the money, it’s a real money comes in, money comes out kind of. I think it is, James.
Cheryl Stainsby
I think if you’re, if you’ve got a bit of a hobby type business, and you’re possibly earning under the threshold where you have to pay GST, which is 80 to 100,000, then possibly working as a sole trader is right for you. But I think if you’ve got to a point where your income is over that amount, if you’re starting to incur debts to suppliers, And I think you really seriously need to think about whether you should be operating as a company.
James Flaherty
Right. So what about if you employ people? You’re thinking like if you start… I’ve told you in the past about… various people have approached the Solvers with businesses that, they’re just in their own name and the money all comes into their bank account and then they pay everybody out of their bank account. So that seems to me as a real good example of do not try this at home because that seems to be fraught with danger, that kind of complexity out of someone’s bank account. Is that right?
Cheryl Stainsby
My experience with a lot of the clients that I deal with is that a lot of people do have trouble differentiating between what is their money and what is their business money. And I think it becomes even more difficult when you operate as a sole trader. It often becomes difficult for people to understand that you’ve got to put aside that money to pay the group tax on the wages or the superannuation or the GST or in fact the money that you need to pay your suppliers. Whereas I think sometimes if you’re trading via a company structure, it’s sometimes a little bit easier to be able to differentiate between all of those separate, you know, bills, bank accounts.
James Flaherty
What goes where and what comes where. So, but I mean, a lot of people say, yeah, it’s so much simpler. I’m not very big and do you think you ever find in your world that some people start off small and get big but never really got back to actually sorting all those things out? Do you see that very often or is it?
Cheryl Stainsby
Absolutely and quite often they’re the people that we often have to put into personal bankruptcy. One of the downsides of running a business as a sole trader is that you are responsible for 100% of the debt. Now I’m not saying that anybody sets out in business to fail or anybody sets out to not want to pay people. But the reality is that the Corporations Act was put there to give business owners who are entrepreneurial, who want to take a chance, who want to have a go, the ability to have a measure of immunity, provided they do the right thing, provided they don’t do anything fraudulent, provided they don’t trade insolvently. Because as we all know from COVID, things happen that are out of your control. And if you find you’re in trouble, but you’re operating via a company and you’ve done everything right, then there is a measure of immunity for the director in that case.
James Flaherty
Well, let’s keep going. Thanks for that one, Cheryl. So maybe not to sole trader. Okay, thanks. A reminder that these podcasts are general in nature and do not constitute advice, and they don’t take into account your personal circumstances. So if you think Though that some of the issues raised might apply to you, should seek qualified financial, legal, or counselling advice.
Transcript- Small Business Closure Advice
Episode 13 – What is its worth less than you owe?
James Flaherty
Welcome back to Getting Closure for Your Business and You. I’m James and I’m here with Cheryl Stainsby from Your Director’s Advocate. Hello again, Cheryl.
Cheryl Stainsby
Hi, James.
James Flaherty
So last time, Cheryl, we talked about what’s it really worth, sort of the business that you’ve worked and strived all of your life for, or had many years for, and it comes time to sell or to get away or to close it down. might be worth quite as much as you thought. Now especially what do you do then if that’s not worth as much as you thought and you’ve got some debts that are more than what you’re likely to get. So what’s that scenario? Do you see it often and what should someone do?
Cheryl Stainsby
We do see it often and we often find that people sometimes are reluctant to sell because there’s not enough money to cover. the debt of people hang on they hang on sometimes they just shut it down and walk away and you know I think what people often don’t realise or sometimes they get a little bit defensive and say well you know I’m not going to sell it to Fred Smith for less than what I think it’s worth but the reality is that if they do sell and they get less money than they need to cover their debts, well, that’s still not the end of the world because you can still then use that money to appoint an insolvency practitioner to finalise the affairs of your business and make sure that it’s finalised in such a way that it’s not hanging over your head for the next two years, three years, or, you know, you haven’t got creditors chasing you.
James Flaherty
So you’re saying you wouldn’t go straight off to… So it’s like you’re not dead, so you don’t go straight to the undertaker straight away. You talk about what you’ve got to do first. So you go and get some advice from somebody such as yourself, as a director’s advocate, about, hey, what are my options here? What’s the process to make sure that I’m compliant with all the laws and all that sort of stuff? Yeah.
Cheryl Stainsby
That’s right. And you know, depending on whether there’s just you working in the business or whether you’ve got an employee working in the business, it may be that there’s some suppliers that are owed money. It may be that there’s some superannuation owed if you’ve employed staff. It may be that if you get some money for the business, but not all that you want, that you’re able to pay some of the debts of the business. And if that happens, it’s really important to get advice because there is some debt that’s a priority. Staff superannuation, for example, is a priority it always needs to be paid first. So you might get some advice as to which debts need to be.
James Flaherty
Paid first. We’ve sort of done that, haven’t we? We’ve sort of covered off and all the ones and certainly I encourage people listening today to make sure that they’ve heard the ones about the sort of debts you might be liable for.
Cheryl Stainsby
Yeah.
James Flaherty
So if your company’s been, we’re talking about companies here in this particular situation, say your accountant or someone set you up a PTYLTD company, might or might have a family trust or something associated with it, you’ve got You’ve got a few things you’ve got to do if you’ve got to shut the thing down, especially if it’s got some money outstanding against it. A lot of these cases too, part of the reason why you’re saying, Cheryl, I take it, is that a lot of those debts, like we’ve talked about before, might be owed by the company, but the bank or the photocopier company or the trade. trade suppliers, got you on the hook as well just in case. So you might have some personal debts that you’ve got to try and sort. They’ve got to be in the back of your mind as well as trying to sell out of the business. How often do you see people in this situation? How often do you see this?
Cheryl Stainsby
Frequently.
James Flaherty
Yeah right.
Cheryl Stainsby
Frequently. There’s a lot of small businesses that fall into this category and To be honest with you, James, sometimes it’s not even a matter of putting the company into liquidation. Sometimes where there’s a lot of personal liability, we have to sit down and discuss with the business owner whether filing for bankruptcy is a better option. If there’s very limited funds and there’s a lot of personal liability, then sometimes filing for bankruptcy might be the better option than actually liquidating the company.
James Flaherty
And that’s a lot to accept for a person who’s worked for years and then… That’s the thanks they get.
Cheryl Stainsby
Absolutely, yeah. And you can understand why people just don’t do anything and often just shut the doors.
James Flaherty
The Australian ways kind of ignore it.
Cheryl Stainsby
And walk away and just wait for nature to take its course.
James Flaherty
Or wait for someone to knock on the door. So I suppose what we’re saying here then is don’t wait for the knock on the door. If it’s get advice, not only from an accountant, but it’s probably also from like a person who specialises in the area, which is a bit of a sell, but the idea is that understand, put your arms around what you’ve got.
Cheryl Stainsby
Yeah.
James Flaherty
So then you know what you’re up for if you want to shut it down or try and sell it. That’s right, yeah. You might get everything you need. Great, okay, let’s keep talking. A reminder that these podcasts are general in nature and do not constitute advice and they don’t take into account your personal circumstances. So if you think, though, that some of the issues raised might apply to you, should seek qualified financial, legal or counselling advice.
Transcript – Small Business Closure Advice
Episode 12 – You’ve worked so hard in this business.
James Flaherty
Hey, I’m back here with Cheryl Stainsby from Your Director’s Advocate. I’m James. Hey Cheryl, how are you?
Cheryl Stainsby
Good, thanks James.
James Flaherty
So look, Cheryl, you know, you’ve been working hard for years and it’s just time to get out. You’ve been running a small business for a while. We haven’t really talked about this. What if you just want to get out? What do you do then?
Cheryl Stainsby
James, we see a lot of small business owners who’ve got a handyman business, for example, or maybe a lawn mowing round, coffee van, and as you said, it’s time to move on, it’s time to retire, and they want to sell their business. And what we find is a lot of people have a very overestimated idea, inflated idea, of what their business is worth.
James Flaherty
Right, so they sort of think that I’ve worked all these years, I’ve worked years and years and years, this must be fantastic. I’ve got all these loyal clients who come and buy a pie from my pie van every week, or how many gardens I hedge. So what are you saying? You’re saying that in fact you’ve got to actually think, well, what is that, what would someone actually pay for that? Is that what you’re saying?
Cheryl Stainsby
That’s what I’m saying, and I think too quite often. People might have a business loan. They might have some debt that’s secured against their house or against their business. And so they feel that in order to sell the business and walk away, that they have to clear that debt. So they might have $150,000 business loan, for example. and they believe that they need to get $150,000, that’s what their business is worth.
James Flaherty
Yeah, right. Okay, so I’ve got a debt of X, so I need to get X plus Y because that’s what I want to get paid.
Cheryl Stainsby
That’s right.
James Flaherty
And where does that fall down?
Cheryl Stainsby
Well, in reality, quite often, their business literally earns them a wage.
James Flaherty
Well, like so, again. 50 grand a year or something?
Cheryl Stainsby
That’s right, yeah. And so if somebody’s going to buy that business and it’s only going to bring them in enough money to earn a wage, then that’s really what the value of the business is. And I guess it’s important often to go and see a business broker to find out what your business is actually worth.
James Flaherty
What someone’s prepared to pay for it effectively.
Cheryl Stainsby
That’s right, yeah.
James Flaherty
And then they can test the market and say, okay, so now what are you going to do if, uh-oh, you know, I’ve been working all these years, I’ve hedged all these hedges, I’ve done all this sort of stuff. So what do I do now if suddenly, hang on, I’ve got $150,000 debt against my house and the broker says I could at best get maybe 50 grand, or maybe 100 grand. What do I do?
Cheryl Stainsby
Look, I guess a lot of people don’t believe the broker. A lot of the brokers that I work with, their sort of stories are that people are very upset. by this. But I think what people need to understand, and particularly if they’ve been to see a couple of different brokers and been given the same story, possibly if you’re at that point in your life where you just can’t run the business anymore, sometimes it’s better to accept a smaller payout and be able to walk away than to end up not getting anything for your business at all.
James Flaherty
Yeah, okay, so you’re… So I think the point that we’re trying to get to here is, and I think we can probably do this over a couple of podcasts about what do we do if you don’t have enough money we might do in the next episode. So the bit that’s really interesting that people need to be is that kind of realistic, be realistic face. So did you say that people, how often do you find that? Do you find that most of the time people have got an over estimated view of what their business is worth?
Cheryl Stainsby
Look, I think that’s true. I think it’s something people have been passionate about. It’s their life’s work. So they believe that they should be able to get sufficient money from the sale of their business to be able to retire comfortably. And sadly, that’s often just not the case.
James Flaherty
It’s not the case. So I suppose there’s a few things there for business owners to be mindful of is, one of them’s about understanding the actual value of your business. So it’s almost one of those things you’d almost do, like in the big end of town that I call it, a stress test. How much does this actually work? I’m working seven days a week, I’m working like a dog. I’m getting effectively, in some cases, in some of the franchises, I’m getting like, you know, $5 an hour. When it comes time to sell it, if I’ve been getting $5 an hour for a long period of time, There’s a good chance a lot of people aren’t going to pay a lot of money for the privilege to work like a dog in work, get $5 an hour. So you need to be quite sensible about what things are. OK, so Cheryl, let’s talk next time about what do I do when I don’t have enough money to actually cover all the debts of the business. Yes.
Transcript – Small Business Closure Advice
Episode 11 – Taking the Step
James Flaherty
Welcome back to our podcast series, Getting Closure for Your Business and for You. So once again, Cheryl Stainsby from Your Director’s Advocate. Welcome, Cheryl.
Cheryl Stainsby
Hi, James.
James Flaherty
So today’s a really interesting one. Today’s, we’ll call today taking the step. And that’s… sort of, you’ve decided it’s time, you’ve got to actually do something about liquidating a company. Okay, step us through that part of the process.
Cheryl Stainsby
It’s quite often a long journey to get to the point where you realise that your back’s against the wall and now you need to appoint a liquidator. And so how do you know? How do you know who to go to? There’s a lot of people out there who have insolvency companies who are advertising on the net, on LinkedIn, on Facebook. How do you decide who to go and see?
James Flaherty
Like all through the noise of all these people who say they can help you. That’s right. You know what you mean.
Cheryl Stainsby
Yeah, that’s right.
James Flaherty
So how do you choose?
Cheryl Stainsby
Well, I think you’ve got to be, you’ve got to have, you’ve got to trust your advisors. So if you’ve had an advisor that’s been working through with you, it might be your accountant, it might be your lawyer, it might be a financial advisor of some sort, it might be a director’s advocate. If you’ve got somebody that you trust, generally you’ll find that they have contacts that know, maybe know two or three different insolvency practitioners. And I would advise you to perhaps talk to two or three different insolvency practitioners. Don’t just grab the first one you see on on Facebook or LinkedIn, and certainly don’t grab the cheapest one. I think that you need to talk to them. You need to understand what it is that you’re signing up for by putting your company into liquidation. And I think that possibly you need to feel comfortable with the liquidator that you’re appointing.
James Flaherty
That’s, yeah, okay, I get that. So you’re saying that, so you’ve a person who you’ve been speaking to for a little bit of the time, who’s an advisor, we’ve talked before about the point of acceptance, someone’s approached you with the problem, they’ve been honest with you. You’re saying there’s sort of a panel of good liquidators around town, well credentialed, well qualified, respected amongst the business community. You’d go to a couple of them and say, with your advisor.
Cheryl Stainsby
Absolutely, and find out what the process is. Find out what it’s going to cost you, exactly what the steps are that you’ll have to go through. And as I said, you’ll find that if you speak to two or three different people, you’ll feel probably more comfortable with one person than maybe you’ll feel with another. Bearing in mind, you always have to remember that Liquidators are working for the creditors.
James Flaherty
Right.
Cheryl Stainsby
And they are required to act on behalf of the creditors. They’re not acting on behalf of the director. But that’s not to say that they’re not going to treat you with the respect that you deserve. And they will give you all of the information that’s pertinent to putting your company into liquidation.
James Flaherty
So if you go to the liquidator with an honest, Hey, this hasn’t worked out approach, These people are, in a lot of cases, businessmen or business people themselves, so they will understand that, things go wrong. So if you go, and like we’ve talked before about not having funny transactions going on or selling things off to a relative and all that, so you go to them with a pretty well set out set of affairs for them, then their job is to do the job with with the information that they’ve got and be able to investigate knowing that you’ve run a good business.
Cheryl Stainsby
That’s right. And I think the other thing to remember too, James, is that the liquidator will look after the affairs of your company. The liquidator, nine times out of 10, is not able to give you advice in regard to your personal affairs, in regard to any personal guarantees that you may have given as a result of trading and they are generally unable to advise you as to what the fallout may be from those because that’s.
James Flaherty
In some cases it’s not their job and even not all of them would know so you really got to get the advice of a of somebody like a director’s advocate who’s actually seen the whole process end to end and also sort of kind of in some ways walks in the shoes of the director. Is that sort of?
Cheryl Stainsby
That’s right. And look, let’s be honest, most of these liquidators do have a reasonably good understanding of what the ramifications are for the director, but legally they cannot advise the director in regard to their personal affairs if they’re liquidating the company.
James Flaherty
Right. A bit more to talk about next time. Thanks.
Transcript – Small Business Closure Advice
Episode 10 – Blame Game with Bruce Pasetti 1
James Flaherty
Welcome back to the Your Director’s Advocate podcast. I’m James Flaherty. I’m here with Your Director’s Advocate, Cheryl Stainsby. How are you, Cheryl?
Cheryl Stainsby
Good, thanks, James. How are you this morning?
James Flaherty
Yeah, really well, really well. So this morning, we’re joined by Bruce Pasetti from Stratos Legal, Principal of Stratos Legal in Brisbane. How are you, Bruce?
Bruce Pasetti
I’m well, thank you, James. Thanks for having me, Cheryl.
James Flaherty
So the lead into this series, Bruce, is that we’ve been talking about the accountant never told me, or the bookkeeper never told me. We called this a little mini-series, The Blame Game. And the idea behind this was the watch-outs for directors, making sure you’ve got the right advice, but also the people who might be working with businesses in trouble, what are the things they’ve got to keep in mind. So one of the questions I had for you, Cheryl, was how often when people come and see you, have they phoned a friend, or spoken to the person over the back fence, or gone to their cousin who’s given them, and I’m doing those voice marks, they’ve got legal advice from a friend, or a relative, or somebody who’s helping them out. How often do you see that?
Cheryl Stainsby
We see it a lot. And unfortunately, in the insolvency space, it’s really important that you get advice from the correct people. And I suppose a few examples that we often see would be where a client owes somebody some money, maybe they’ve received some legal notices, creditors stacked demand is probably one of the classic ones we see. They’ve spoken to their cousin or somebody who has a bit of legal knowledge who said, oh, don’t worry about that. If you’re disputing it and you don’t owe the money, you don’t need to worry about that. And then often by the time they actually show us the document, sometimes it’s actually too late to really do anything about it. Maybe the company’s already been wound up because somebody said to them, oh, don’t worry, if you don’t owe the money, a liquidator can’t shut you down. So that sort of advice isn’t helpful. And our perspective is that if you get a legal document, then really you should be getting advice from somebody who’s a specialist in that field. And that’s why I wanted to bring Bruce along today, because Bruce is an insolvency specialist. And realistically, he can give advice as to how to manage these documents. It’s his area of expertise, and it’s going to be good advice. It’s going to be advice that’s going to help you stay out of trouble. Or if there is no immediate resolution, then perhaps he can refer a client to somebody who can assist with an exit strategy, who can assist with the next step after that document. Not only those legal documents, we often see clients who have come to us perhaps with a sale document or a loan document that’s been drawn up by somebody who it’s not their area of expertise. And then maybe further down the track when that document’s called into play in a bankruptcy or a liquidation, the document doesn’t stand up to scrutiny. And of course, the client is upset then because they’ve paid somebody to have this document drawn up, and it doesn’t actually have the desired result.
James Flaherty
To jump in, so Bruce, why would someone come to your firm in sort of the context of what Cheryl’s been saying there? Because, I mean, if I’ve got a lawyer that I’ve been using and he’s done business sales for me, so when do you tend to get involved? Maybe that’s the best lead into that.
Bruce Pasetti
Yes. Thanks, James. I mean, I was just listening to Cheryl. We always call it barbecue advice. People getting the advice at the barbecue from their uncle who was a solicitor 50 years ago, or my favourite is always, I know somebody who knows a KC and the KC said this. And yet, I can’t get a KC to do anything for me without putting a lot of money in their bank account. It really comes down to the modern world where there are experts in so many things, and the days of a generalist are behind us. It’s just like medicine. You go to your GP who almost immediately, other than for the most common ailments that you could almost diagnose yourself, will send you off for a battery of tests and then refer you to an expert, just to be sure. So it’s been the same in the law for quite a while. And so expertise means you’re dealing with somebody who predominantly practises in that area of the law, insolvency, as we’re talking about here, which means that they should be pretty much up to date with what’s going on in the legal scene, what’s the latest case. They should also be quite prompt in their advice. A good expert probably off the cuff will get it right 90% of the time and then go back and just double check on that 10%. It’s always important to do the 10% work. One misconception is that it will cost more coming to the CBD to see my firm, for example. Yes, parking is more expensive in the city, but we don’t see too many clients face-to-face in this day and age. It’s telephones and Teams meetings. But the costs are usually very competitive because we see the job as being a routine job, whereas somebody who doesn’t practise in insolvency sees it as a novel, complicated job. And so they’re going to charge a lot more to get. So it’s your bread and butter.
James Flaherty
Yes. Yeah. And I mean, that’s your day job. And we talk about this a bit, don’t we, Cheryl, about kind of your day job dealing with people in this situation, as opposed to somebody who’s kind of helping out a business mate. So they’re going to watch out for a lawyer, an accountant, we’ve talked about before. If you’re sailing close to the edge of what you know, then are you really helping them? Can I be that aggressive?
Bruce Pasetti
I think you can. I saw an example just recently, in fact, I know that Cheryl was involved, where there was a strange situation where a company was inadvertently deregistered before something else had been done. And the client, before speaking to Cheryl, went to their accountant, who said, well, we’ll register a new company, call it the same as the deregistered one, and that should work. Okay. And that didn’t work. What could possibly go wrong? Yeah. So they spent money on a company that they did not need. These people are retired. They then went to their suburban lawyer, who gave them a solution, but it was a very expensive solution, or one that wasn’t going to work in the timeframe that they needed it to work. And they spent money there. They then thought to ask Cheryl, who referred them to somebody in our office, who said, maybe we could just try the really simple solution. We can do this. Can’t be 100% certain that that will work, but if it does, solves your problem. If it doesn’t, well, you’ll have to revisit. Well, it worked. Took a couple of hours and it was all done. And the lady actually rang me after it had happened, saying, gee, I wish I’d called Cheryl before. I’ve spent all my money. And she actually asked if she could get the money back. But there was a lesson that she learned there.
James Flaherty
Yeah. There must be a bunch of people you both see who’ve spent a bit of money before they come to you. So it’s a quite interesting example, actually. It is.
Cheryl Stainsby
But the other thing I think that you need to factor in here as well, and I’ll go back to the sale contract, for example. Your suburban guy who’s doing a sale contract is doing a normal sale contract. And a sale contract for a stressed business is often very different to a sale contract just for a normal business. So the cost then to the client going forward, if one of the companies ends up in liquidation, can be high because a liquidator may then say, well, it’s not a valid contract. You haven’t paid enough money. You haven’t done this. You haven’t done that. We want more money. And the cost then can be quite high to the client. Whereas if they’d maybe paid a little bit more, seen a specialist and got a sale contract that was suitable for the purpose drawn up, then there wouldn’t have been that extra cost to go down the track.
James Flaherty
I’m singing from your hem sheet here a bit, but if I’ve got an account and I’ve got a lawyer, I’ve got a business that’s in trouble, hang on, you’re telling me I’ve got to use somebody else. You do need to go to somebody like you, Cheryl, because what’s the difference between a business contract that’s ordinary and a contract when I’m in trouble? That’s a lot for a person who’s trying to deal with keeping the lights on.
Cheryl Stainsby
It is, and it’s not what they do. And I think we’ve said that sometimes the advantage of having someone like myself, like a director’s advocate, is that while I’m not a specialist and I can’t do sale contracts, I can’t lodge the financials, I don’t do the liquidation, I know what needs to be done and I will project manage. I’ll make sure that the client is referred to the correct professional for the job, the correct lawyer, the correct accountant, the liquidator, the finance person. So it’s about making sure that they go and see the right professionals.
James Flaherty
But then again, one of the things we do often wonder about, if I go into a business and I’ve got a bit of trouble, I’m always worried that the audit partner might, if I refer, I’m an accountant, I refer it into an accountant in town, does the audit partner of that particular firm and the tax department, am I going to get my client back ever again if they do survive this scenario? So if you refer them to Bruce, I suppose I’m saying, Bruce, you don’t want to do the bread and butter stuff for some suburban lawyer, do you?
Bruce Pasetti
Well, that’s right, James. Our experience is that it’s a little bit like going to see the oncologist, probably the best doctor that you’ve seen, but you’re not going back to the oncologist if you ever have to because that was a bad experience, it’s been resolved, you’re grateful for the service, but you really don’t want to go back and revisit it. So we find that a lot of the time, deal with the problem that the client has, be involved in whatever that needs to be done, they move on because we’re associated with resolving bad times and bad situations and they don’t always want to stay around and have us do other things. But sometimes they do and sometimes we will do those things.
James Flaherty
But we have talked about where sometimes the relationships are over, the accountant’s relationship is over or the legal relationship, the relationship with that particular client and professional has run its course. That’s fine, there’s a difference.
Cheryl Stainsby
But I think too that one of the tightropes that we walk as directors advocate is that we’ve got to make sure that, for example, if an accountant does refer a client to us, that if we have to refer them to other professionals for something, that we’re not stealing their client and we go to great lengths to make sure that what we’re trying to create is a good client to go back to the original referrer. And you’re right, a lot of the clients that we refer to you, Bruce, they come to you for a specialist agreement out of the scope that their suburban lawyer who does their conveyancing does. And so then they go back to their suburban lawyer for the wills and all of the other bits that they do.
Bruce Pasetti
That’s right, Cheryl. I think that clients often see it as part of the project management thing. It’s a bit like you go to a builder who’s got the whole team of trades together. And yes, the job gets done well because the builder’s got all of their trades and can coordinate them and the trades themselves over time start to know each other. And so if I’m going to be late, I don’t necessarily even have to call Cheryl. I’ll call you, James, to say, hey, my paint hasn’t arrived today, so it’ll be there tomorrow, et cetera. The same situation happens is if people just see you as part of the project. You’ve done your piece of the project and then they go back and move on with their lives. And look, we’re attuned to what Cheryl’s saying about not wanting to steal a client either because it ends up being bad karma and we end up losing our referral sources if we’re trying to do that.
James Flaherty
You’ve been listening to a discussion between Cheryl Stainsby and Bruce Pasetti on Your Director’s Advocate. Tune in and I’ll continue the conversation next time.
Cheryl Stainsby
This is a general reminder from Your Director’s Advocate that these podcasts are generally nature and do not constitute advice. They don’t take into account personal circumstances. If you think that some of the issues raised might apply to you, you should seek qualified financial, legal or counselling advice or contact Your Director’s Advocate on 07 3340 5102. Thank you.
Transcript – Small Business Closure Advice
Episode 9 – Personal liability. Any other snares?
James Flaherty
Hi, you’re back on the Getting Closure for Your Business and You podcast. I’m James. I’m here with Cheryl Stainsby, who’s the head of Your Director’s Advocate. Hi, Cheryl.
Cheryl Stainsby
Hi, James.
James Flaherty
Right, so last time we talked about director’s guarantees. What’s the other, what are the other kind of personal liabilities? What else would I be on the hook for potentially in a liquidation scenario as a director?
Cheryl Stainsby
James, I think in one of our earlier podcasts we talked about director liability for unpaid GST and PAYG. And quite often, the tax department may issue a notice to the director before the company’s gone into liquidation saying, hey, you’re personally liable for this debt. But it’s not uncommon either for the tax department to issue a director penalty notice to a director after the company’s gone into liquidation where the BAS hasn’t been lodged on time. And so the director can be held personally liable for unpaid PAYG and unpaid GST, wine tax. And these notices often come out of the blue and directors are quite shocked by it. The other thing to remember too is that these notices won’t be sent to the company address, they won’t be sent to the liquidator, they’ll be sent to the director’s home address. So Our advice to directors always is to make sure that your home address on the company search is correct, because that’s the address that these notifications will be sent to. So it’s not uncommon three months, four months after a company’s gone into liquidation for these notifications to be sent to directors who haven’t lodged their BAS on time.
James Flaherty
So the answer, I mean, clearly the first answer is to lodge. Lodge, lodge, lodge. How often would you, I mean, people who come to you, how many of them would be, you know, rule of thumb, it’s a tax problem that’s done them in who may or may not have had a, may not be up to date. Is that fairly common?
Cheryl Stainsby
It is significant. I think there’s been a lot more publicity about director’s personal liability since the introduction of director penalty notices a few years ago. So we probably don’t see it as often as we used to. But I guess a few years ago it wasn’t uncommon to see someone who hadn’t lodged a bass for two, three, 4, five years.
James Flaherty
Right.
Cheryl Stainsby
But I guess that’s not as common these days. More often than not, people have lodged on time, but they just haven’t paid. And there might be one or two that haven’t been lodged. But generally speaking, they have lodged on time. And so by putting their company into liquidation, they can often avoid personal liability for these unpaid taxes.
James Flaherty
And like we’ve spoken before, I mean, it’s worthwhile remembering that it’s not only super. It’s not only PAYG, but it’s also the wine equalisation and obviously the GST. So if you don’t have the money in your account, you’ve at least got to lodge.
Cheryl Stainsby
At least lodge, that’s right. Now unfortunately with superannuation, the directors are personally liable for superannuation. And it’s actually a criminal offence not to pay staff superannuation. So my advice to directors is you know, whatever it takes, pay stuff, superannuation. You know, that’s somebody’s future retirement fund. Yeah. So, but the tax department do come down very hard on directors who haven’t paid superannuation. So there’s, you know, we certainly see less unpaid superannuation these days than we used to in the past before that new regime came in.
James Flaherty
So going back then, but they are a thing you might have to watch out for. So these other liabilities down the track, the director’s penalty notices are something that might… So we’ve talked about guarantees before, you’ve talked about director’s penalty notices coming up as another point of personal… Is there any other personal other liabilities that we’ve got to keep in mind?
Cheryl Stainsby
I think we have to think about insolvent trading.
James Flaherty
Oh yes.
Cheryl Stainsby
Insolvent trading is where the company has traded when it wasn’t able to pay its debts, when debt was incurred, when the company wasn’t able to pay its debts when and as they felt due. Once again, this is an issue that seems to be a lot more commonly pursued by liquidators these days.
James Flaherty
So you’re seeing a bit of an uptick in them actually pursuing it. Well, that’s probably a conversation in its own right. So we’ll hold that over to next time. But that sounds, I’ll be interested to do a deep dive next time into insolvent trading. And is that a thing and is it actually being chased up? Well, that’s great. Thanks, Cheryl.
Transcript – Small Business Closure Advice
Episode 8- The Fine Print – personal director guarantees
James Flaherty
Welcome back to the Getting Closure Podcast. I’m James, I’m here with Cheryl Stainsby. Hello again, Cheryl.
Cheryl Stainsby
Hello, James.
James Flaherty
So, personal guarantees, Cheryl, this is my, this is the headache. Tell me when these come in. When do these come in in the process? Personal guarantees.
Cheryl Stainsby
James, when we’re working with clients, one of the things that we like to do before we sit down and put a company into liquidation, is we actually ask the client whether they have a copy of all of the credit applications that they’ve signed. So we can see if they’ve signed any personal guarantees. And unfortunately, most directors don’t keep a copy of their credit applications, so they often don’t know. Some directors do know, and they’re aware of any personal ramifications that are going to fall out of liquidation. But more often than not, what happens is two to three, maybe four weeks into a liquidation, suddenly letters will start coming to the director personally, holding them personally liable for debts that they’ve signed personal guarantees on.
James Flaherty
Right, so that’s, and that can be quite seemingly harmless looking documents and agreements. So people used to talk about photocopier contracts, but all sorts of things where you sit there and You’ve just got to read the fine print because you’re actually authorising them. Well, tell me what they’re actually authorising them to do. So what do the actual things say?
Cheryl Stainsby
A lot of credit applications have a clause that says, and it’s usually clearly labelled as a director’s guarantee, it says that if the company doesn’t pay its debts, that you as the director will be personally liable for those debts. Photocopiers are a great example. A lot of people assume that when they sign up for a photocopying machine, that if the photocopying machine gets taken back by the company, that that’s the end of it. But actually quite often what you’re signing is you’re actually signing a contract for a certain number of photocopy.
James Flaherty
So it’s like a service contract?
Cheryl Stainsby
A service contract, that’s right. And you might then suddenly find that you’re liable for a $20,000 debt if you break one of those. More commonly in the construction industry, particularly with plumbing and electrical supplies, all of those suppliers have personal guarantees in their credit applications. So when it becomes apparent that they’re not going to get paid by the liquidation, then they will often write to you directly and demand payment.
James Flaherty
Right, and what happens if you say, I’ve got a waterfront home, but I’ve got no money. What happens in that situation?
Cheryl Stainsby
Generally speaking, the creditor will pursue you to bankruptcy.
James Flaherty
Yeah, right, so basically these contracts will allow you to I was thinking about your service contractor. You’re talking about if you break a service contractor for a photocopy, it’s not the broken photocopy, it’s the service. It’s the agreement you’ve signed. And so it’s the agreement you’ve signed or the goods you’ve taken. So they can, to the value of that, plus any costs, isn’t it, to try and get from you personally. And then if you don’t have any money in the bank account, well then it’s the car, the boat.
Cheryl Stainsby
Well, they have to appoint, generally speaking, they have to appoint, they have to pursue you to bankruptcy for that to happen. But there are occasions when some creditors, and we do see this a lot more often now, a lot of credit applications now have what we call a charging clause in them, which says if you don’t pay the bill, that we can put a mortgage on your property, we can put a caveat on your property. And you then can’t deal with that property. You can’t sell it and you can’t refinance it until you pay the debt of that creditor. And this is very common in the construction industry at the moment. So I strongly advise everybody to very carefully read credit applications and get advice, get legal advice before signing, but to keep every single one of them so that if your business does get into trouble, you clearly understand what the risks are to the director personally if you put your company into liquidation and you don’t pay these creditors.
James Flaherty
And I think that’s, you know, a wise old liquidator said to me once that never give a director’s guarantee. I mean, these days that’s pretty hard to do. For a lot of things that you’ve just got to do it. So if that’s the case, then You know, you’ve got, you must keep your records. You must sort of know what you’re up for. That’s got to be part of your conversation, as you say in the beginning. It’s like, Hey Cheryl, I’ve signed these contracts and these are the implications. So at least you’ve got to, at least you know what you’re dealing with up front.
Cheryl Stainsby
That’s right.
James Flaherty
Yeah, great. Okay, thanks Cheryl. Let’s keep talking.
Transcript – Small Business Closure Advice
Episode 7 – Avoiding the liability trap
James Flaherty
Welcome again to the Getting Closure podcast. I’m James, I’m here with Cheryl Stainsby again. Hi Cheryl.
Cheryl Stainsby
Hi James.
James Flaherty
So Cheryl’s the director of Your Director’s Advocate. So today, now we’re not gonna do the financial advice. We don’t provide financial advice, do we Cheryl? No we don’t. But one of the main reasons that people’s business goes south is It might not be a very good business anyway, and they don’t pay their tax. So let’s talk about things like tax debt, shall we? And sort of the do’s and don’ts. So we can talk about the fact that we’ve not had a holiday, but in COVID, the tax office has been fairly touchy, fairly, fairly nice. But in the meantime, in April of last year, they changed the law that meant that if you didn’t do certain things, you were even more personally liable than you were before. Talk us through where things are up to.
Cheryl Stainsby
So one of the main reasons that people often end up in bankruptcy after their company’s gone into liquidation is personal liability for debt. And that can be a trade debt that you’ve personally guaranteed, a bank debt, or more and more we’re seeing the tax department hold directors personally liable for unpaid GST. unpaid group tax and unpaid superannuation. Now the ATO have said that if you lodge your BAS on time, then to an extent, there is some exemption from director liability for the PAYG and GST component of the tax debt. So for example, if you’ve got a big tax debt and there’s a large component of that debt that’s PAYG or GST and all your BAS has been lodged on time, the ATO will send you a letter that says you’ve got 21 days to put your company into liquidation or voluntary administration, or we’re going to hold you personally liable for this debt, or pay the debt of course. So if you do that, there may be circumstances where you avoid any personal liability. But if you haven’t lodged your BAS on time…
James Flaherty
Yes, like if you don’t do it and say, I’ll just do the Australian way of just kicking the can down the road, what happens then?
Cheryl Stainsby
There’s a good chance you’ll get a letter from the tax department saying, sorry, but… you are now personally liable for this debt.
James Flaherty
Right, and if that’s unpaid PAYG and super, that’s, especially if it’s GST as well now.
Cheryl Stainsby
It can be substantial.
James Flaherty
Right, and that’s against your house, your car, your bank account.
Cheryl Stainsby
Well, that means that you are now personally liable for that debt. Now, if you don’t have a house, or you don’t have a car, then the worst thing that can probably happen to you is that the ATO may pursue you personally to bankruptcy. Even if you have a house and a car, they will still pursue you personally to bankruptcy and then the bankruptcy trustee will deal with your house or your car. So if everybody has in their calendar the lodgement dates for their BAS, even if for whatever reason you can’t make the payment on that date, at least if you lodge your BAS, on the BAS lodgment date, at least then there’s a chance that if for any reason your company does get wound up, that you may avoid personal liability for that debt.
James Flaherty
And that’s, I mean, obviously, if it’s the first time you’re looking at sort of delaying payment, the ATO will allow you to do a payment plan, but obviously if time, if it’s payment plan upon payment plan, then you’ve got some challenges to face.
Cheryl Stainsby
Look, that’s right. And at the moment, in particular, as James, as you said at the beginning of this podcast, the ATO are being very helpful at the moment with small businesses, and they are allowing small businesses to enter into payment arrangements. And my advice would be that if you do have a tax debt, either via your accountant, ring the tax department yourself and try and work out some sort of a payment arrangement, because putting your company into liquidity is really not the best way to manage a tax debt in most cases.
James Flaherty
It’s the old story, get some advice, get some advice and it’s not from the person over the fat back fence or a person you meet at a BBQ. Yeah, and so, and that’s… Some of the laws have been built about trying to make people take more control of their business and not let it bank up too much. Let’s keep talking over the next series of podcasts of the sorts of things you’ve seen that people have encountered and what not to do. Thanks, Cheryl.
Transcript – Small Business Closure Advice
Episode 6 – My Mum said honesty is the best policy
James Flaherty
Welcome to the Getting Closure podcast. I’m James, I’m here with Cheryl Stainsby. Hi Cheryl.
Cheryl Stainsby
Hi James.
James Flaherty
So today we’re going to talk about something good. We’ve been talking about some of the tough things like anger, sort of people being in denial. and sort of the journeys that people do and the signs that your partner should be looking out for if maybe you aren’t facing up to things. Let’s talk about something a little bit happier today. Let’s talk about acceptance. Okay, so talk me through about what you think someone coming to terms or accepting the situation is. When do you see it and what happens next?
Cheryl Stainsby
Accepting the fact that your business is in trouble and you need help with an exit strategy can often be a huge weight off your shoulders.
James Flaherty
You’ve got to the point where you say, Hang on, I know I’ve got to do something.
Cheryl Stainsby
That’s right. And we’ll often find that at the end of a three-hour meeting, the client will throw their arms around us, they’ll be in tears, and they’ll say, Oh my God, suddenly there’s this massive weight off my shoulders. Because now we know what we’ve got to do, we know what the end result is, we know that we’ve got somebody there to hold our hand through the process, and we’re going to get the right advice every step of the way. And now we just need to get on with it.
James Flaherty
Right, so you sort of see people’s faces change, or the shoulders don’t sag so much. Like, that’s pretty lovely. It’s great that people give you a hug. Not too many people hug me in business meetings, but there you go. So your acceptance for you is the realisation that–.
Cheryl Stainsby
The realisation that there’s somebody there to help you, and that we’ve now got a way forward. You’re not just sitting there looking at a big black wall anymore. Now you can actually see the light at the end of the tunnel. We’ve got an idea what that looks like, what that end result looks like. We’ve stepped out how we’re going to get there. And now we’re going to help you in bite-sized pieces to get there. So it’s not just this mammoth thing that has to be done. It’s going to be broken up into little pieces. And we’re gonna help you every step of the way. We’re gonna make sure that we support you, your family, everybody that’s involved in this business, the staff, maybe we need to help support you to find new employment, new ways of earning an income at the other end.
James Flaherty
That’s for the business owner, help them, yeah.
Cheryl Stainsby
Business owner, yeah.
James Flaherty
So for the, that’s awesome. come to you, they’ve got that acceptance, they’ve sort of understood like, this is where I’m at, this is the journey, it’s not over, but it’s the journey’s begun in a sense. For sort of the, I don’t know, I know a few business people who will spend quite a lot of time and money to save a dollar. So if they think that they could somehow do this themselves, what’s the acceptance? When have they accepted it? They’ve accepted that they’ve got to do something and approach the parties themselves. That’s the acceptance feeling.
Cheryl Stainsby
And James, look, some people can do this themselves. I’m not going to sit here and say that everybody needs this service. There’s some pretty sophisticated, savvy business people out there who can navigate this themselves and they don’t need help. But there’s a lot of people who do need help, who don’t understand the system.
James Flaherty
The acceptance bell is rung. So when you get rung, so ding, ding, ding in my head, okay, I get this, I understand, the weight goes off. It’s when I’ve got a plan, it’s when I’ve got I’ve talked through the options. I’ve got a better view of what it is that the world’s going to look like when I’m James the plumber who no longer runs his own plumbing business, or Sally the architect who’s no longer, is now working for somebody else, or the franchise that we’ve been running and putting, running for $2 an hour finally closes. That’s the point of acceptance.
Cheryl Stainsby
Sometimes it is. Sometimes I’ll get a phone call from a client the next day after we’ve had our three-hour meeting and they’ll say to me, Cheryl, that’s the best sleep, that’s the best night’s sleep I’ve had in two or three years. Thank you so much. We know where we’re going. For some people, they’re still struggling even through the process. I had a phone call from a client last week whose company went into liquidation and he went personally bankrupt just before Christmas. did a negotiation with the bankruptcy trustee so that a family member has now purchased his house so that he didn’t lose his house. And he rang me last week and he said, Cheryl, that is the best Christmas I’ve had in years. I sat around the pool with my kids, we played, my wife said to me, My God, you are so relaxed. And for him, that was the acceptance. Up until that moment, it had still been extremely stressful, and he’d been in denial about how it was all going to end.
James Flaherty
So, for him, life goes on.
Cheryl Stainsby
For him, life’s good now.
Transcript – Small Business Closure Advice
Episode 5 – Acceptance. So what’s that feel like?
James Flaherty
Welcome to the Getting Closure podcast. I’m James, I’m here with Cheryl Stainsby. Hi Cheryl.
Cheryl Stainsby
Hi James.
James Flaherty
So today we’re going to talk about something good. We’ve been talking about some of the tough things like anger, sort of people being in denial. and sort of the journeys that people do and the signs that your partner should be looking out for if maybe you aren’t facing up to things. Let’s talk about something a little bit happier today. Let’s talk about acceptance. Okay, so talk me through about what you think someone coming to terms or accepting the situation is. When do you see it and what happens next?
Cheryl Stainsby
Accepting the fact that your business is in trouble and you need help with an exit strategy can often be a huge weight off your shoulders.
James Flaherty
You’ve got to the point where you say, Hang on, I know I’ve got to do something.
Cheryl Stainsby
That’s right. And we’ll often find that at the end of a three-hour meeting, the client will throw their arms around us, they’ll be in tears, and they’ll say, Oh my God, suddenly there’s this massive weight off my shoulders. Because now we know what we’ve got to do, we know what the end result is, we know that we’ve got somebody there to hold our hand through the process, and we’re going to get the right advice every step of the way. And now we just need to get on with it.
James Flaherty
Right, so you sort of see people’s faces change, or the shoulders don’t sag so much. Like, that’s pretty lovely. It’s great that people give you a hug. Not too many people hug me in business meetings, but there you go. So your acceptance for you is the realisation that–.
Cheryl Stainsby
The realisation that there’s somebody there to help you, and that we’ve now got a way forward. You’re not just sitting there looking at a big black wall anymore. Now you can actually see the light at the end of the tunnel. We’ve got an idea what that looks like, what that end result looks like. We’ve stepped out how we’re going to get there. And now we’re going to help you in bite-sized pieces to get there. So it’s not just this mammoth thing that has to be done. It’s going to be broken up into little pieces. And we’re gonna help you every step of the way. We’re gonna make sure that we support you, your family, everybody that’s involved in this business, the staff, maybe we need to help support you to find new employment, new ways of earning an income at the other end.
James Flaherty
That’s for the business owner, help them, yeah.
Cheryl Stainsby
Business owner, yeah.
James Flaherty
So for the, that’s awesome. come to you, they’ve got that acceptance, they’ve sort of understood like, this is where I’m at, this is the journey, it’s not over, but it’s the journey’s begun in a sense. For sort of the, I don’t know, I know a few business people who will spend quite a lot of time and money to save a dollar. So if they think that they could somehow do this themselves, what’s the acceptance? When have they accepted it? They’ve accepted that they’ve got to do something and approach the parties themselves. That’s the acceptance feeling.
Cheryl Stainsby
And James, look, some people can do this themselves. I’m not going to sit here and say that everybody needs this service. There’s some pretty sophisticated, savvy business people out there who can navigate this themselves and they don’t need help. But there’s a lot of people who do need help, who don’t understand the system.
James Flaherty
The acceptance bell is rung. So when you get rung, so ding, ding, ding in my head, okay, I get this, I understand, the weight goes off. It’s when I’ve got a plan, it’s when I’ve got I’ve talked through the options. I’ve got a better view of what it is that the world’s going to look like when I’m James the plumber who no longer runs his own plumbing business, or Sally the architect who’s no longer, is now working for somebody else, or the franchise that we’ve been running and putting, running for $2 an hour finally closes. That’s the point of acceptance.
Cheryl Stainsby
Sometimes it is. Sometimes I’ll get a phone call from a client the next day after we’ve had our three-hour meeting and they’ll say to me, Cheryl, that’s the best sleep, that’s the best night’s sleep I’ve had in two or three years. Thank you so much. We know where we’re going. For some people, they’re still struggling even through the process. I had a phone call from a client last week whose company went into liquidation and he went personally bankrupt just before Christmas. did a negotiation with the bankruptcy trustee so that a family member has now purchased his house so that he didn’t lose his house. And he rang me last week and he said, Cheryl, that is the best Christmas I’ve had in years. I sat around the pool with my kids, we played, my wife said to me, My God, you are so relaxed. And for him, that was the acceptance. Up until that moment, it had still been extremely stressful, and he’d been in denial about how it was all going to end.
James Flaherty
So, for him, life goes on.
Cheryl Stainsby
For him, life’s good now.
Transcript – Small Business Closure Advice
Episode 4 – Anger’s high cost, even when you’re right
James Flaherty
Welcome to the Getting Closure podcast. I’m James. I’m here with Cheryl Stainsby. Hi, Cheryl.
Cheryl Stainsby
Hi, James.
James Flaherty
So last time we talked about denial, sort of that thing that stops you from confronting the next step. But I think we sort of talked a lot of that was about fear, wasn’t it?
Cheryl Stainsby
Yes.
James Flaherty
It was about sort of, you know, the fact that you couldn’t sort of face up to that. But what about the person Who’s angry? Take who’s it’s either somebody’s fault, someone’s got to blame. So this COVID wrecked my business or the border closures or all the sorts of things we’ve had to deal with. How do you deal with anger? What have you seen?
Cheryl Stainsby
James, anger is just as consuming and just as bad as denial. There are so many people who are so angry at the world or an individual who has disrupted their business. Maybe there’s some sort of a legal action?
James Flaherty
What do you mean like a vigil, like someone who hasn’t paid a bill or…
Cheryl Stainsby
Someone who hasn’t paid a bill, someone who’s suing them, a tradesman who’s done a job and now the client’s coming back with all sorts of false accusations about work not being done properly. Yeah. This can be really all-consuming to the point where quite often the small business owner becomes totally un-commercial.
James Flaherty
Remember that, so what do you mean un-commercial? Give me examples of what you mean.
Cheryl Stainsby
Well, really throwing massive sums of money at trying to defend or sue quite often when it really is a lost cause. They’re so angry, they really can’t see that sometimes They just need to accept that you need to move on, you need to get some advice about the best way to move on, instead of constantly fighting this uncommercial battle that you’re just never going to.
James Flaherty
So in a sense, you’re saying that there are situations where a business has been wronged or a business owner has been wronged, but the system is, the way it is, that sometimes they’ve just got to take a tough decision and accept it. They have been wrong but it’s kind of too bad. Is that what you’re saying or not? What are you saying?
Cheryl Stainsby
I am saying that and unfortunately people don’t really want to hear that and it’s not right. I’m not saying it’s right. But there are large organisations with bottomless pockets who will just keep dragging on illegal action until you run out of money. And I think often the small business owner has to be realistic about who they take on before they resourced all of their resources to the point where they’ve now got no money left to look after themselves.
James Flaherty
So do you see that anger that you’ve seen, is that kind of, is it like almost the cliche of a cancer that eats away at the relationships, the family? I mean, where do you see that anger going that come, someone who comes, do people come to you angry, for example?
Cheryl Stainsby
They do come to us angry and quite often their partners have been saying to them, you know, this is a lost cause. This person that we’re fighting against is never going to let you win.
James Flaherty
Or they’re never going to pay because you’ll.
Cheryl Stainsby
Never have the money. They’re never going to pay. Even if you get the judgment, they’re not going to pay. And quite often, partners can see this, but sometimes the small business owner is just so invested in this whole fight that they can’t see it. And it’s actually very difficult for them to sit down and be commercial about their situation. Sometimes it takes two or three people coming from the outside to sit down with them and make them see that what they’re doing is just totally uncommercial. and they need to be realistic about the outcome.
James Flaherty
Have you seen anger with anger at the system, anger at the whole, like have you seen that anger just sprayed around because someone’s wronged them, has that then turned them into a bad business person themselves? Like you’ve talked about uncommercially chasing debts, but are they, have you seen people letting that eat away at the way they do business themselves and becoming a bad business person? Have you seen, is that effectively what you’re saying it does? Or is it more about anger of what’s been done to them?
Cheryl Stainsby
I think it is, but I also think that this anger then permeates their family life too.
James Flaherty
So that’s a risk.
Cheryl Stainsby
Because dad or mum or whoever it is suddenly becomes a horrible person to be around. They don’t spend time with their family. And the families see all this. It has a huge impact.
James Flaherty
And the risks of this, I mean, everybody knows the risks of not facing this are huge.
Cheryl Stainsby
Marriage breakups are a huge fallout from a lot of this sort of stress.
James Flaherty
Yeah, right. So you see that quite often. So it’s really about addressing, and I mean, again, it’s a bit like we’ve talked about before, you and I, it’s about if you see that in your partner, then it’s something about trying to talk to them about it. Just keep talking.
Transcript – Small Business Closure Advice
Episode 3 – Taking the leap from denial
James Flaherty
Welcome again to our Getting Closure podcast. I’m James. I’m here with Cheryl. Hi, Cheryl. How are you going?
Cheryl Stainsby
Hi, James.
James Flaherty
Cheryl Stainsby from Your Director’s Advocate. So last week, Cheryl, we talked about people being in business who maybe aren’t accepting the fact that something is wrong. And if you think about the stages of grief, you could say that one of those is denial. So talk me through the denial that you see. Like, what is the denial that you’ve seen that have kept people from knocking on your door, for example?
Cheryl Stainsby
So James, I think that one of the big problems when somebody’s business is in trouble is that there’s just a big black hole in front of them. They can’t see a way through to the other side. They don’t know what’s gonna happen, and the fear of the unknown is often a hell of a lot worse than the fear of the reality.
James Flaherty
Is that partly ’cause people have got so many horror stories of what goes wrong? We talked about that last time, sort of what someone talked about them at a barbecue about what they did.
Cheryl Stainsby
Yeah, you’re gonna lose everything.
James Flaherty
Right.
Cheryl Stainsby
The reality is, for a lot of people whose business is maybe going bad, they need to put it into liquidation, they don’t lose everything. Even people who have to go personally bankrupt don’t always lose everything. A lot of people whose businesses fail still manage to keep their house. They still manage to keep their cars. Nobody comes to your door and takes your kids’ computers. A lot of these things are just fallacies. But people are terrified of them. So they’re frightened to even face it because they’re frightened of what might happen.
James Flaherty
So this is this place where people aren’t prepared to accept that there’s an issue or they know there’s an issue but they aren’t prepared to do something about it or is it kind of both?
Cheryl Stainsby
They’re not prepared to do something about it because they’re terrified of what might happen. And what we really like to do when clients come to see us is sit down with them and step them through the whole process. We spend 3 hours with a client. at least in our first meeting, going through the whole business process, what they own personally, what they’ve got, what they haven’t got, and we can usually in that first meeting step them through what’s likely to happen as a result of their business failing.
James Flaherty
And gosh, maybe it mightn’t be that bad. Is that what you’re thinking sometimes?
Cheryl Stainsby
Often it’s not that bad, yeah. I think.
James Flaherty
You’ve got to be clear that sometimes it’s pretty hard. Sometimes it is pretty tough.
Cheryl Stainsby
Sometimes it is bad. But if you’ve got someone to hold your hand through the process and guide you and make sure you do everything properly, introduce you to the right professionals, who will make sure you’re doing everything by the book. You’re not doing anything dodgy.
James Flaherty
Nothing wrong, yeah.
Cheryl Stainsby
If you’re not doing anything wrong, then often even the worst case scenario is more palatable.
James Flaherty
That’s fine. That’s great. That’s awesome. Someone should definitely do that. But if I’m in denial, how am I going to get to that? We talked about last time about maybe if a wife or a husband spots a person not taking calls or seeing things getting business being interrupted by shipment stoppage. Like, what’s the bit that gets them to you? Is it the knock on the door from the sheriff? I mean, so yeah, business.
Cheryl Stainsby
Actually, don’t laugh. Sometimes you’re right. Sometimes it is the knock on the door from the sheriff. It’s the demand from the ATO. It’s the somebody knocking on the door, serving them with a document.
James Flaherty
That’ll do it.
Cheryl Stainsby
Sometimes, yeah, sometimes that is the catalyst. that will actually get them to come and see us. And I think also we haven’t talked about the fear of what do I do when this business is closed.
James Flaherty
Of course.
Cheryl Stainsby
We’re talking about a lot of small business owners and this is what they’ve done all their lives.
James Flaherty
Well, you’ve bought yourself a franchise, you’ve put a lot of money into it and you’ve put some money against the house off and that sort of thing. What are you going to do when this is finished?
Cheryl Stainsby
Exactly.
James Flaherty
And yet it’s human nature, really, isn’t it, to sit there and say, well, I’ll keep on, I’ll just give it one more try. You’re almost, in some ways, you’re an entrepreneur, you’re a person trying to run a business. So what the government and the society tells you, what you’re doing is good, you’re running your business. But they’re not so friendly sometimes when it’s not working out for you. So denial’s a reasonable thing for a lot of people to perhaps encounter. The challenge you’re going to say is to step past it.
Cheryl Stainsby
Is to, and I think this is it. Once people do step past it, once people do get some advice, often they find then that they can move on to the next step and start to do something about their business. Yeah.
Transcript – Small Business Closure Advice
Episode 2 – Your Business in Trouble
James Flaherty
Hi, welcome back to our Getting Closure podcast. I’m James, I’m here with Cheryl Stainsby. Hi, Cheryl.
Cheryl Stainsby
Hi, James.
James Flaherty
So we’re going to talk this week about something that I think a lot of people really have had it happen in their life if they’ve run a business or thought about it. Cheryl, what’s it like when a business is in trouble?
Cheryl Stainsby
James, it’s often debilitating.
James Flaherty
What do you mean by that?
Cheryl Stainsby
For the business owner. The business owner is just totally preoccupied with phone calls they’re getting because they haven’t paid their bills, the tax debt which they know is due, maybe the staff superannuation which is due and they can’t pay it. They don’t want to let their family know often that the business is in trouble and so they’re terrified.
James Flaherty
Why don’t they let their family know?
Cheryl Stainsby
Because they’re frightened that they’ll be seen as a failure.
James Flaherty
Right.
Cheryl Stainsby
And look at, you know, I know that I may be being a little bit gender biased here in saying that sometimes men find this a lot more difficult to share with their partners than women do. But a lot of men really see that when their business is failing, this is a personal failure. This is a failure of them as a go-away.
James Flaherty
That’s not unrealistic when you think about it, because if you say a lot of people like… who are, hi, I’m John, I’m a plumber, I’m Sally, I’m an architect. Like a lot of their business is kind of part of who they are. They are, that’s right, yeah. So if some part of their business that is part of their identity doesn’t work, that goes to the core of who you are.
Cheryl Stainsby
It does, James. And what we all need to be mindful of too is that for most people in small business, and I’ve been a small business owner all my life, so I understand that, this is your life’s work. For a lot of people, they set up this business to give their family a better lifestyle, buy a house, have a lifestyle that all the family could enjoy. And now suddenly when it looks like it’s not working, it’s just such, they feel like they’re letting down their family and it’s so difficult for them. to face this. And they feel like they’re facing it alone because they’ve got nobody to talk to. They don’t want to admit to their family, their friends, maybe their other business owners that they’re friendly with, their suppliers. They don’t want to admit that there’s a problem. So they’re struggling with this internally on their own. They’re not sleeping. Often they’re drinking. A lot of drinking goes on during this. And so If this kind of rings a bell, if you’re sort of hearing something here that sounds familiar to you, I would say that it’s time to have a chat to somebody who basically can help you.
James Flaherty
How often though, and we’ve had this conversation over many years now, professional careers, how often is it before, why is it that people come to you so late? Because this stuff’s probably been going on for a while before someone seeks advice. So why do people put that off?
Cheryl Stainsby
I think that if somebody seeks advice, then they often have to admit that there’s a problem.
James Flaherty
Yeah, right.
Cheryl Stainsby
And once you admit there’s a problem, then you’ve got to do something about it. And while we’re all just pretending that it’s not happening, while you’re still pretending that, you know, the next big sale is going to get you out of trouble, you’re going to win gold lotto, you know, mum’s going to die and leave you some money. Well, we’re all still pretending that it’s all okay, you actually don’t have to face the reality. and what might be the worst case scenario. And if you’ve heard horror stories, it’s probably a lot, you probably think it’s going to be a lot worse than it actually is. And quite often when we do see clients who’ve spent years sometimes in denial and afraid to face the truth, when they actually do sit down with somebody, the actual reality is not nearly as bad as they thought that it was going to be.
James Flaherty
So that’s kind of good news, but so if you’re in a family where your partner or a member of your family is running your business, what are the signs maybe that you should be watching out for and trying to steer them towards someone like you? What should I be watching out for?
Cheryl Stainsby
Look, I think you’d be watching out for calls that aren’t being answered.
James Flaherty
Yeah, right.
Cheryl Stainsby
You’d be watching out for mail that’s not being opened. If there’s a stop of supply of a certain product, it might be because the bill hasn’t been paid.
James Flaherty
So it’s not even as extreme as going to the shopping centre and the credit card doesn’t work.
Cheryl Stainsby
No, it’s not as extreme as that. Yeah, right. You know, if your partner is just preoccupied all the time, then maybe…
James Flaherty
To reach out.
Cheryl Stainsby
Maybe, reach out, reach out to them.
James Flaherty
Okay, well let’s have a look. We might go into that in a bit more detail next time. So thanks, Cheryl, again. Let’s for another great podcast today.
Cheryl Stainsby
Thank you, James.
Transcript – Small Business Closure Advice
Episode 1 – Getting Closure
James Flaherty
So, welcome to the Getting Closure Podcast. I’m James, I’m here with Cheryl Stainsby, who’s the leader of Your Director’s Advocate. So, Cheryl, let’s start by really what’s this concept for this podcast, what do we want to get out of this for the business owner, what’s this for?
Cheryl Stainsby
James, I think as a result of COVID, there’s a lot of small businesses out there who are really struggling. Their sales have dropped. They might have debts that they can’t collect. But in a lot of ways, businesses are struggling. And a lot of small business owners don’t know where to go to for help. They don’t have access necessarily to professionals. And so they’re floundering.
James Flaherty
So you’re talking to say a lawyer might have a account, a business person might have a lawyer or an accountant, but they might go to the lawyer for a particular issue or just to get their accountant to do their tax. But you’re saying there’s a bunch of people out there who would possibly do it a bit tough, who might be facing some tough decisions. where do they get their, where do they get their thought, who’s for them? Is that really what you see?
Cheryl Stainsby
That’s what I’m saying. And look, probably most people have an accountant, although a lot of people would literally just have someone that does their tax at the end of the year. So not what I would call a business advisor. And I’ve got to say, James, a lot of people don’t have a lawyer because most small businesses, really, don’t have any experience, they’ve never had to.
James Flaherty
You might do a lease and that’s about it.
Cheryl Stainsby
And that’s about it. So a lot of people just don’t have those resources. When their business starts to get into trouble, sometimes the only people they go to for advice is maybe the next door neighbour who had to put their company into liquidation three years ago.
James Flaherty
So they’re qualified because they went broke themselves.
Cheryl Stainsby
That’s right. And so quite often they might be horror stories too. So now our small business owner is actually terrified to seek advice because they’re so frightened of all the bad things that they’ve heard. And it doesn’t necessarily have to be bad if it’s done properly and you get the right advice and you’ve got someone to hold your hand through the process.
James Flaherty
So Cheryl, your business is called Your Director’s Advocate. Is that the idea that… you’re the person who’s with the person who might be the director or the owner of the business in this kind of world of potentially shutting their business down and all the horror stories you’ve heard. Is that the concept?
Cheryl Stainsby
Yeah, because I would say that most of the small business owners that we look after, while the outcome is not always the greatest, the experience… is somewhat made easier by the fact that they’ve had someone to hold their hand through the process, to seek advice, and to make sure that they get the right advice from the lawyers, the accountants, the liquidators, the bankruptcy trustees, all of the people involved who make sure the process runs smoothly.
James Flaherty
So we’re not saying that everybody’s got their own agenda in this situation, but everybody’s got their own things they’ve got to get done for businesses winding up or closing down or is forced to close. So you’re saying that, you’re thinking that you’d like the business people to have a set of resources in this series of podcasts about, hey, what should I do here? And obviously from somebody such as yourself, who’s easily, easily a phone call away if, hey, I need a bit more help.
Cheryl Stainsby
That’s right. And there’s a lot of people, there’s a lot of professional people who are involved quite often in the liquidation of a company or the bankruptcy of an individual. But a lot of these people give advice in their area of expertise.
James Flaherty
Right.
Cheryl Stainsby
And quite often they don’t really see the full ramifications of a person who’s going through the process from beginning to end. So maybe their company goes into liquidation, there’s personal ramifications and they then have to file for bankruptcy. Do they lose their house? Do they keep their house? What are the stresses on the family as a whole as they work through that whole process? And the director’s advocate is the person that’s there right from the very beginning to the very end, and sometimes, James, it’s a five-year process.
James Flaherty
So really what we’re saying is we’d love people to tune into these podcasts. It’s not going to be like, well, it is in some ways going to be like going to the dentist. There will be some tough things to hear and some things that people have got to face. But the objective is that we want people to be able to tune in and hear, hey, is this me? Am I facing this problem? What do I do here? So we’ve got the advantage of Cheryl’s skills to help us through this. So over the next kind of series of podcasts, there’ll be little snippets that people can kind of grab as they go, can’t they, Cheryl, and they’re driving into work or something. like that. The idea, we’ll just take a topic at a time and tune in next time.
Any or all of these reasons for business owners with a Pty Ltd company who:
If you have personal assets you want to protect, like a family home or director’s guarantees, this may not be for you, but you should ask us.