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Solvency is not always just liquid

A lot of people tend to focus on the liquidity ratio, when determining whether a company is solvent or not. It’s psychologically very weighty. Liquidity ratio = current assets / current liabilities But this can cloud judgment. Imagine you need to prove the company’s solvency because it is facing a court ordered wind-up, and the…

Tips for briefing experts

If you’re briefing experts in court proceedings, or are in the business of giving expert evidence, two really important cases were handed down in the past month. Collectively the cases run for about 1,400 paragraphs, so I haven’t been able to finish a cash summary for my followers. As I run a busy practice, it may take…

Debtor factoring is not like an overdraft facility

“Our business is not insolvent,” remarked Scotty, “we have plenty of room in the limit of our debtor factoring facility and we made a small profit last year.” Let me know what you think about this in the comments, because I have heard it 3 times just this week. Do I think this is right? If working…

When might you need a solvency report?

1. Preventing a winding-up application (most common type) 2. Fighting a voidable transaction claim that the Liquidator says occurred when the company was insolvent (very common) 3. Trying to stave off bank recovery or foreclosure action 4. Proving to the board of directors that a Voluntary Administration or #safeharbour proposal is the only option 5.…

QuickBooks is a ‘kept book’

It’s official, #QuickBooks is a ‘kept’ ‘book’ for the purposes of the Corporations Act, thanks to a WA Supreme Court decision handed down last Wednesday. 7 barristers and a day of hearings, lead Justice Tottle to this groundbreaking conclusion. The issue was in relation to whether or not a liquidator could rely upon QuickBooks in pursuing various voidable…