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IN THE CURRENT ECONOMIC AND LEGISLATIVE CLIMATE ITS TIME TO REVIEW YOUR ASSET PROTECTION PLAN

Asset Protection involves implementing strategies to separate your personal assets from your business risks. Asset protection is an essential part of any business structure to be considered by professional advisors and clients alike.

It is extremely surprising that many company directors or business owners continue to personally hold family assets in their own name, exposing their personal portfolio to the business risk they encounter in their capacity as a company director or a business owner.
No doubt you are well aware of the risks faced by business owners and other stakeholders in conducting business in this current economic climate. We are continually hearing suppliers are tightening their cash control in particular areas of the economy and clients are slower and unable to complete their contracts when expected.

Factors include:
• Banks reassessing their lending criteria;
• Tightening credit levels;
• A more rigorous and active tax office in respect of audits and collection processes; and
• A decline in the general trading conditions for some sections of the economy.

In addition, there is now greater risk associated with being a company director.

Administrators/liquidators of companies can make directors personally liable for the actions of their company (see earlier Pointon Partners articles) and the Australian Tax Offices (‘ATO’) can pursue directors by using their additional powers under s.588FGA of Corporations Act 2001 even where a Directors Penalty Notice is a full defence (see earlier Pointon Partners articles). Under s 588FGA of Corporations Act 2001, if a liquidator of a company recovers an unfair preference from the ATO, the ATO has the right to pursue the company directors for the amount which the ATO is liable to repay to the liquidator. Combined with recent changes to the Directors Penalty Regime, company director’s potential person liability has significantly expanded.

It has never been as important to assess your current asset protection strategies. Have you separated your personal assets from your business risks?

The best time to implement or update your strategy is when your company or business is in sound shape. Attempting to implement asset protections strategies once your business is in financial difficulty will leave you susceptible to bankruptcy law and possible civil sanctions.

Our 10 point checklist will assist you to understand whether your current asset protection strategy is sufficient:

No. Matter

1 Has any Property transfer between spouses

  • Note Bankruptcy Act ‘claw – back’ provisions which may defeat pre – bankruptcy transfers
  • Is your spouse a director of the Company? If so, why?
  
2 Are assets held in company or trust entities or in personal names

  • Is the business conducted in entity separate from where assets accumulate?
  
3 If the individual is a company director, are their assets owned personally

  • Note personal liability risk of company directors
  • Have you ensured your current residential and business addresses are up to date with ASIC (VERY IMPORTANT)
  • What procedures have you adopted so your accountant or book keeper can inform you when your BAS is are lodged?
  • What system do you have in place to ensure that the ATO lodgements are made in time?
  
4 Have any personal guarantees for business debts or liabilities been granted in favour of creditors

  • Seek releases when leave business
5 Discretionary trust provides for appropriate provisions in event of bankruptcy of Appointor  
6 Loans from stakeholders to business operating entity are appropriately secured with mortgage debenture, mortgage, registered charge or other securities. Have you confirmed registration of all required loan security under the Personal Property Securities Act 2009?  
7 Implement asset protection strategies against spouse or de facto partner  
8 Consider implementing appropriate business restructuring strategies for asset protection purposes

  • Separate ownership of intellectual property assets from business
  • Use of small business CGT provisions to move business away from property assets
  • Consider more complex strategies that may be available
  
9 Consider whether appropriate to transfer assets to superannuation fund

  • Note Bankruptcy Act ‘claw – back’ provisions which may defeat pre – bankruptcy transfers
  
10 Once problems arise, seek professional advice  

If after considering the checklist, you are unable to adequately answer each of the points and envisage problems with your asset protection strategy, we strongly recommend that you seek advice before any difficulties arise.

Pointon Partners has vast experience in providing advice on asset protection strategies and would be pleased to assist you with your needs.

If you would like to discuss any of the above or require us to review your policies please contact Anthony Pointon or Laszlo Konya on (03) 9614 7707.

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