Many people have found themselves caught on the wrong side of a company’s slide into receivership. Others have been directors of insolvent company and have found themselves at risk of legal action from creditors or shareholders.

If you are concerned about being exposed to insolvency, it could be time to see a lawyer.

The Australian Securities & Investments Commission (ASIC) advises people to seek their own professional advice to find out how the Corporations Act and other laws apply to their situation.

“When a company experiences financial distress or becomes insolvent, there are likely to be a wide range of people affected, including directors, creditors, employees, and often, shareholders and investors,” ASIC Commissioner Michael Dwyer said.

Late payment of invoices, dishonoured payments or the issuing of post-dated cheques should trigger alarm bells that a company you are dealing with is in financial trouble.

What can you do about it?

You should first try and raise your concerns with the company. If this fails, other options include reviewing your trading arrangements, seeking legal advice or making a complaint to ASIC.

If you are the director of a company, signs to be aware of include ongoing losses, tight cashflow, unpaid creditors and problems getting finance.

If you receive a s222AOE penalty notice from the Commissioner of Taxation for your company’s unpaid tax, you should immediately seek professional advice, warns ASIC.

Failure to take action within 14 days could see the commissioner take recovery action against you personally for the unpaid tax amount.
Signs that may indicate your employer is in financial trouble include late payment of your wages or unpaid wages and unpaid superannuation to your nominated superannuation fund.

Seek legal advice if raising your concerns with your employer fails to resolve the issue.

Employees can get further information from the Workplace Infoline 1300 363 264 or via the Australian Workplace website, and can lodge a complaint with the ATO regarding unpaid superannuation.

Other options include contacting your local union member and making a complaint with ASIC.

For more information see www.asic.gov.au/insolvency, www.workplace.gov.au or www.ato.gov.au/individuals.