Nick Roberts

Looking at people being turned away from the HN cafés the other Sunday started me thinking. Just how bad are things? Will the latest cut in interest rates bring relief?

CASH FLOW DIFFICULTIES

For the business owner faced with cash flow difficulties, trying to decide how to react is not easy. Not many would want to give in without a fight but there comes a time when continuing is stressful, pointless and financially irresponsible. If the business is a company the directors must not carry on the business in a manner likely to create a risk of serious loss to the company's creditors (so-called "reckless trading") through insolvent trading.

Insolvent trading means that the Company continues to trade and continues to incur further debts, whilst the Company is unable to meet its existing debts or will be unable to pay the current debts being incurred. As soon as the directors become aware the company is insolvent, they need to decide whether the company should continue to trade or appoint a liquidator or otherwise, they are placing themselves at risk of being made personally liable to creditors.

In practice, when one's livelihood is disappearing and being aware that personal guarantees may cystallise, knowing when to call it a day is difficult. If in doubt at all, seek early advice from an experienced accountant or an insolvency practitioner who won't charge you for the initial meeting. What you do now, or don't do, could be under scrutiny later on and may be critical in determining your financial future.

If you have any tax or business queries of any kind telephone 0800 ASK NICK, e-mail nick@abac.co.nz or use "Contact Us" on www.abac.co.nz. The information in this article is of a general nature and should not be relied upon as a substitute for specific advice.