Not paying your tax debts is more than a business faux pas. Worst case, your company can be wound up and taken out of your hands. If you’ve received a wind up notice you’re very close to this becoming a reality – but you do still have time to prevent it. To help you make informed decisions in this situation, here’s everything you need to know about wind up notices, as well as what you can do to prevent your business going under.
What is a winding up notice?
A wind up notice, officially called a ‘notice of application for a winding up order’, is a serious document sent by a creditor (usually the ATO) to a company that has failed to pay their debts. Its purpose is to advise them that they have applied to court to begin legal proceedings to wind up their business. Serving a winding up notice is the most serious communication the ATO can have with a company that has unpaid tax debt. Because it’s sent to the registered office address held by the ASIC, it’s important this is kept up to date. In order to get to this point, other attempts the ATO has made to recover the money, such as payment plans, legal warning notices, garnishee notices and statutory demands, will have already failed. Receiving one, therefore, shouldn’t be a complete shock.
What are the conditions for applying for wind up?
To apply to court for a winding up application, generally the company must have failed to pay the debt set out in a statutory demand within 21 days of receiving it. This is taken by the court as grounds to believe that the company is insolvent and a risk to the ATO and other creditors.
What should I do if I receive a winding up notice?
If a winding up notice arrives in the post, you need to act fast. First off, contact an insolvency professional who can run through your options as well as help arrange legal representation for your court date, which is advised in the notice.
This date, which is usually 21-28 days from the day you receive it, is the day your business will go to court to be wound up. However, by taking the right action, promptly, it may be possible to prevent this from happening.
At this stage, you still have the opportunity to oppose the presumption of insolvency. This includes filing evidence of solvency, demonstrating that creditors have a better chance of getting paid if it’s not wound up, and notifying if voluntary administration is already in progress.
Other options to prevent wind up happening on the date given include paying off your creditors in full, or entering into a mutually agreed payment arrangement.
What happens if I exhaust all my options?
If you cannot prove solvency or arrange payment, your business will inevitably be wound up during the hearing, with the court placing it in the hands of an appointed liquidator.
Don’t get wound up, take action
Receiving a wind up notice is very bad news, but it doesn’t have to spell the end. By seeking the right professional advice and utilising all your options, you might just be able to bring your business back from the brink.
If you’ve been sent a wind up notice and need help managing the next steps, get in touch with us today.