Protecting Your Assets
Tony and Bill decided to start a business together. Initially, they were going to be individuals in a business partnership, which meant they each had unlimited liability if anything went wrong in the business and their personal assets were also potentially at risk. Tony always thought it best to get legal advice up front before embarking on new ventures. Bill didn't like using solicitors, as he thought they cost too much and he believed he was capable of looking after himself in business. However, Tony convinced Bill that they should obtain legal advice from Hutchinson Legal about the available options to set up the business so that they could limit their personal exposure to business debts and protect the assets they had built up in the past. The Business Restructure team of solicitors at Hutchinson Legal advised them both to set up a company structure to provide some protection for personal assets. Tony and Bill then became directors of the new company and commenced operating the business. One day, a telecommunications salesman arrived at the business and spoke to Bill whilst Tony was out seeing a customer. The salesman offered Bill a deal that seemed too good to refuse. Bill then signed a form given to him by the salesman, without reading it very closely. The telecommunications system for the business was then installed. A few years later, the business began to experience cash flow problems due to downturn of the global economy. The business couldn't pay many of its debts on time, the account with the telecommunications company was seriously in arrears and Tony was receiving letters of demand. Tony and Bill decided to go back to the Business Restructure team at Hutchinson Legal to seek advice about what to do with the business. The solicitors advised them about their director's duties (including the duty to not trade whilst insolvent) and to have the business books and records analysed by accountants to see whether a reconstruction plan could be implemented to avoid liquidation of the company. In the course of investigating the business affairs, the Hutchinson Legal solicitors uncovered that Bill had given the telecommunications company a personal guarantee for the business debt and his personal assets. Bill was shocked to learn that his interest in the family home had been given as security for the debt and he was seriously at risk of loosing his house. Fortunately, Tony and Bill had sought help early. A compromise with the business creditors was able to be facilitated by the Hutchinson Legal solicitors through negotiations with the telecommunications company, the banks and other creditors, so the business could continue operating.