Our Brisbane office is handling a company liquidation that must be giving the insolvency statistics a nudge.
Out of the corporate group:
- We have three of the companies in liquidation
- Two more liquidators have another four other companies in liquidation
- Three of those companies have been or are still in receivership
Our main creditor of one of our companies (C1) was a partnership (P1) of three entities (all now under external administration – not with us). Our company (C1) had borrowed money from that partnership. Another partnership (P2) of four entities (the three partners in P1 plus another company) loaned money to another of the companies (one of the liquidated companies in receivership – C2). C2 had guaranteed the P1 loan from the original lender.
C1 had guaranteed a loan to another company in the group (in liquidation and receivership – C3) from other third party financier and given a security to support it. Two of other of the P1 partners had also given guarantees in their own right, along with the fourth partner in P2. The director of this group (the group was all controlled by one person who is a bankrupt with yet another trustee) was a partner in both the P1 and P2 partnership, had also guaranteed this and every other loan made to the group.
The bankruptcy trustee is now the largest creditor in C1, but his largest creditors (with the exception of the ATO) are some of the other companies (particularly C1 and C2) in the group because of the guarantees.
We have previously said in these e-Update articles that business owners should consider the possible consequences of corporate structures when they are creating their business empires. Complicated is not always better.