Is your business still viable?
Can your business recover?
You may need to work out whether your business is still viable. You can do this by:
Talking to your accountant
Some people may advise you to deliberately liquidate your company to avoid paying debts, and to then continue your business through a new company. This is called illegal phoenix activity. Directors that are found to have undertaken such activity may face large fines and up to five years imprisonment.
The people providing this advice, sometimes called pre-insolvency advisers, are not regulated. This means there are limited means of recourse if anything goes wrong. They are generally not members of any professional bodies, hold no professional registrations and therefore may not have any professional indemnity insurance. It should be noted however that not all pre-insolvency advisers are untrustworthy.
If you are approached by anyone cold calling you to offer advice, be very careful.
1. Ask about how the adviser will be remunerated
2. Get the adviser to put their “advice” in writing
3. Speak to your accountant or lawyer about the “advice”
4. Ask who the proposed registered liquidator is and check their registrations
5. Check whether they are a member of ARITA, the professional body for insolvency practitioners. ARITA members can be looked up here.
Some of the advice untrustworthy advisers may give you includes advising you to:
appoint a “stooge” or straw person as a director of your company or new company
liquidate your business to avoid paying debts and continue your business through a new structure
destroy/lose the company books and records
transfer money or make cash withdrawals from company accounts