Thursday, October 29, 2009

Marching Orders part 2

Mine Host requested an advice from a lawyer. He contacted his (then) current law firm and was directed to a smart young lawyer specialising in the field in question.

The requested advice was: "What are the implications and downside to winding up "Shelf Company X"?

Shelf Company X was a small company that had been used by Mine Host in the past. It had no assets, had not traded for several years, yet had suddenly become the target of a massive claim by the Tax Office, for a figure well into Six digits. (How Shelf Company X got into this predicament will be covered in another post)

At the time Mine Host was thousands of miles away in a new career, working more hours than a human should be awake, and did not want to engage in litigation against the ATO.

Especially as:
If he won: He got nothing except a massive legal bill.
If he lost: He had to pay the massive Six figure sum and he got a massive legal bill.

The smart young lawyer sent Mine Host a very long written advice. He covered many topics, but made no mention of the implications of winding up the company.

Mine Host phoned & wrote to the lawyer, restating the initial request.

The Smart Young Lawyer sent Mine Host another long written advice, covering many topics, but again made no mention of the implications of winding up the company.

Mine Host contacted the Lawyer again, ensured the lawyer understood his simple request and once again the Smart Young Lawyer sent a long written advice.... (and so on and so forth).

This went on for several exchanges. Mine Host grew rapidly more impatient. Time was wasting.

Eventually in exasperation Mine Host contacted the overseeing partner at the law firm and in-a-manner-that-could-not-be-mistaken instructed the partner that he was-sick-to-death-of-the-Smart-Young-Lawyer giving advice-on-everything-under-the-sun-except what he had been asked.

Shortly thereafter Mine Host received the advice he requested.

The advice: (abridged) "If the company is dissolved nothing will happen. The sole creditor is the ATO, and they won't be able to grab anything. Your troubles will be over"

The time take to produce the Two Paragraph Advice: One Month

The bill: $20,000.00 (due to the large amount of written advice provided)

Mine Host severed relations with that law firm just as soon as Shelf Company X was dissolved.


Anonymous said...

That advice is wrong.

Mine Host said...

As you wish Anon.

All I sought was a forecast of the outcome of a certain course of action.

The advice was accurate.

Anonymous said...

So, as a director, you were comfortable making a declaration to ASIC that there were no outstanding (or pending) liabilities notwithstanding the tax bill?

Mine Host said...

Even though I scrutinise the post closely, I do not find where I mentioned that ANY declaration was made to ASIC, nor that I was a director. Nor is there any mention of a tax bill, though there is mention of a claim by the ATO. Though not immedatily apparent to you & I, the distinction is important to lawyers.

Whatever your profession Anonymous, you begin to see why laymen such as you & I use lawyers for the tricky stuff! Hehe.

Anonymous said...

OK. Rephrased: How will the director(s), get comfortable making a declaration to ASIC (as required to by the Corporations Act before winding a company) that there are no outstanding (or pending) liabilities notwithstanding the potential claim by the ATO?

Mine Host said...

I haven't the faintest recollection of the machinations of closing the company, years have passed since this event.

The significance you give to the contents of a declaration escape me, the company had no assets, had been inactive for years, and creditors had no avenue to recover any monies owed, the cupboard was bare.

Since that time nothing has been heard of the company, or the issues surrounding it.

I'll post at a later date on the events, it makes interesting reading as the ATO was way out of line.

Anonymous said...

Wooo! I thought it was a recent thing. My mistake. Thanks, you're good at it.