I’ve been in the small grocery business for over 15 years but things have been more difficult since a major petrol station chain opened a new onsite retail outlet nearby. The last year has been particularly bad. I’m now thinking I might end up having to close but want to keep going as long as I can. Can I do that?
Lawyer Answers (1): Answers from lawyers are general preliminary responses. They are not formal legal advice and cannot taken account of all your circumstances. They do not create a lawyer–client relationship.
Answer by Kelly Angus, Adelaide 5000 SA
- Continuing to trade while insolvent is serious. It opens up potential claims against you personally as a director and even criminal charges for serious offences. If you have any suspicion that your company may be insolvent you should seek legal advice right away.
- There are a variety of warning signs of insolvent trading to look out for including:
- poor cash flow;
- difficulty obtaining finance or raising capital;
- loan defaults;
- outstanding tax lodgements or payments;
- poor relationships with lenders;
- declining sales;
- disorganised or non-existent accounting records and procedures;
- payment of creditors outside trading terms;
- receipt of solicitors’ letters, demands, summonses, warrants and judgments;
- postdated cheques or dishonoured cheques;
- round-figure payments to creditors versus payments for invoiced amounts;
- suppliers requiring payment on delivery (COD);
- difficulty collecting debts; and
- board disputes and resignation of key employees.