A common question that is often asked when starting a new company is if I become the director will I be liable for the debt. We explore that in this article
Insolvency is where a company can no longer pay their bills. In Australia an insolvent company is a company that is not following the Corporation Act, which states that the company must be solvent in order to be trading.
Violating the Corporation Act potentially means trouble for the director of the company. You see when you are the director of the company you are have to make sure the company follows all applicable laws. In addition if there are share holders or creditors you also have duties to them as well to make sure things in the company are going well for them. It really means that you have to make sure that everyone's interests are protected.
As the director if you don't do this you aren't in compliance with the Corporation Act and you could become personally liable for the company's debts, especially if you they go bankrupt. What happens is the ASIC can charge you compensation proceedings that equal the amount the creditors lost. If you violate the Corporation Act you can be fined up to $200,000.
It is crucial in this period that as a Director you do your best to make sure that everyone's interests are protected, stay in contact with what is happening financially with the company and creditors and act as with complete honesty and integrity and you may be able to use this as a defense in order to not have to pay the civil and proceedings charges.
On top of this the director might also be held personally accountable if taxes of the company are not paid. If the company does not pay the taxes the government comes after the company, but if there is nothing to get from the company they can actually make the director liable because he did not do his job and make sure the company was paying all their bills, including their taxes.
As a director thee are a few things that you can do to protect yourself. First you must always be sure to act honestly on behalf of the company and everyone who has interests in the company. On top of that, make sure the company can always pay their bills and their taxes, and if there are any problems, be sure to get financial and legal advice. If you believe that the company is near insolvent or is insolvent, stop trading so that you do not violate any laws. It is recommended that you consult with a financial expert to do what is in the best interest of everyone.
One last note, if you as the director ever become bankrupt you must appoint someone new as the director, a director is not allowed to act if they have received a personal bankrupt.
How many shares do I need to register a company?
It is relatively easy for anyone to set up a new company in Australia. Registration can be completed online and in as early as one day. Other business requirements such as business name registration and goods and services tax registration may also be completed online. One question often asked is how many shareholders are required to register a company?
Do I Need a Public Officer for Company Registration?
While your company is a legal person by virtue of a certificate of registration, it will still need a live human being to perform specific acts on its behalf, like signing and submitting documents. For purposes of your company's registration and operations, you will need to appoint a public officer to represent your company in dealings with government agencies. These may differ from country to country so check with local goverments
Can I form a company with just one person?
Many individuals often wonder when starting a business if they can set up a company and be the sole director and shareholder. This article explores this.
