Commercial Law Q&A’s

How can I protect my personal assets in the event of business failure in these difficult times?
The severe economic impact caused by the Coronavirus and consequent shutdowns of parts of the economy at very short notice has resulted in many businesses suffering financially or having to close permanently. This has highlighted the need for business operators to focus on their asset protection strategies.

There are a number of strategies a business owner can adopt, depending upon their individual circumstances (and also potential tax consequences which may flow from adopting some of these strategies). These strategies can include:

• In the case of company directors who may be at risk in relation to personal liability, either through providing personal guarantees of a company’s performance or due to a director’s obligations under various laws, the risk of exposure can be minimised by minimising the assets in the director’s name e.g. the director’s place of residence being held in their spouse’s name or with a minor proportion of the property being held in the director’s name.

• Having assets in trusts which are then protected from the individual business owner’s personal liability;

• Ensuring that any money invested in the business by the business owner is documented by formal loan documentation and secured over the business’s assets. Even existing unsecured loans are able to be covered by appropriately drafted loan documentation;

• If there are multiple directors, having appropriate agreements in place between the directors and/or the shareholders in relation to potential contribution to personal guarantees given by individual directors, in the event they are called upon.

Each individual person’s circumstances will differ but a consultation with a member of Solari & Stock’s commercial team can investigate and advise on potential strategies to help preserve a business owner’s personalised assets.

The Commercial Team at Solari & Stock can assist you in relation to providing advice regarding how to best protect yourself from future restrictions on your ability to trade. Contact Solari and Stock Miranda on 8525 2700 or click here to book your appointment with one of our Commercial Team members.

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