Director's Responsibilities Continue in Uncertain Times
Directors must keep on top of the following issues at all times:
Monitor actual cash flows against a realistic forecast
Realistic revenue and payment forecasts need to be monitored weekly. A company should pay creditors on time including COVID negotiated bank repayments. Where a shortfall starts to emerge corrective action needs to be taken urgently to enable the promised repayments to be made on time to keep the bank on side.
Decide what Needs to Happen to Become Viable
A company needs to have a sound business plan and to implement the turnaround steps to become profitable quickly. It is crucial to make the difficult decisions to save a business.
Report All Taxes On Time including Superannuation
All unpaid taxes and superannuation need to be reported to the ATO on time. Failure to do so will automatically result in the Director becoming personally liable. Conversely, where a formal insolvency administration occurs, but all taxes have been reported, there will usually be no personal liability unless a Director’s Penalty Notice has been allowed to expire before the insolvency commences.
Where a Director has a suspicion that a debt cannot be paid as and when it falls due, then an offence occurs and a Director may become personally liable. The Government “Safe Harbour” during COVID for Insolvent Trading has ceased.
Take Appropriate Advice and Act Properly
There are many traps for Directors, which can be avoided if they take professional advice.
The options available to achieve a better outcome rapidly diminish as time passes. If all of the available cash has been paid out leaving the cupboard bare, then little can be done.
Directors must look at the signs realistically to prevent digging a deeper hole.
If you would like to discuss these matters further you can give me a call on (03) 9896 9000