Things are tough and the ATO are into you left, right and centre, do you pay them? Many directors often pay the ATO substantial monies before other creditors are paid because of fear and threats of DPN etc. But if the ATO have been paid and the company is then liquidated, then the liquidator will claw back that payment from the ATO as a preference payment, so that it can be divided amongst creditors equally.
This is usually easy because the ATO keep good notes recording all discussions with accounts managers and directors where the directors say that they need time to pay. This can be used as evidence that the directors are guilty of insolvent trading (as the ATO notes evidence the director’s knowledge of the insolvency), which can make the director personally liable for all company debts incurred after the date of insolvency.
Indeed any creditor can sue for insolvent trading – directly, or by way of funding the liquidator’s action. The ATO can then pursue the directors personally for the amount of the preference payment that was reversed.
The liquidator can do the same if they knew or suspected that your company couldn’t pay all of its debts. In this event there is a double whammy as the ATO (or liquidator as the case may be) will also seek their costs.
If you are having any solvency issues, then speak with an insolvency lawyer who specialises in insolvency related matters. Zeke Bentley of Irish Bentley Lawyers is a specialists who will walk you through the highs and lows and protect you every step of the way. It is important to do it right or you may end up doing something you’ll regret – like paying money to the tax office in preference to other creditors.
You should also consider looking at a voluntary administration and deed of company arrangement process to guard against insolvent trading actions, and to protect your credit rating.
This area is fraught with high risk, and requires a skillful navigator, so get advice early, do not leave yourself open or to bad advice.