Test the settlement against every near-term obligation before choosing which payment to promise.
Corporate Recovery Partners
01 / 06
One dispute ends while another account falls overdue
A company can fund a settlement only by using money set aside for a supplier payment. The supplier is essential to work already under way. The director is relieved to end the legal dispute, but the proposed payment may simply move the pressure to another creditor and disrupt the next source of revenue.
List available cash, realistic receipts and all amounts falling due over the relevant period. Include commitments that are easy to overlook while the dispute dominates attention.
Run the settlement through that schedule on its actual payment date. A profitable job or a large unpaid invoice does not necessarily provide money when the settlement must be paid.
Identify what would fund the displaced creditor and how reliable that receipt is. Distinguish a documented short timing gap from repeated dependence on uncertain future collections.
ASIC’s director guidance identifies cash shortages and overdue creditors as warning signs. Seek qualified advice promptly if the company may be unable to pay debts as they fall due.
Do not assume that paying the loudest creditor is the safest course. Ask an appropriately qualified adviser about the company’s position and the consequences of the proposed payment.
Avoid making a legal judgement about preferences or director liability from this article. Those questions depend on the company’s circumstances, transaction and applicable law.
If appropriate after advice, explore timing or terms the company can actually perform. Discuss affected obligations openly through the appropriate channels instead of privately assuming another creditor will wait.
A revised arrangement should address the cash gap, not conceal it. Ensure any changed dates and conditions are properly documented before relying on them.
Prepare the payment calendar and identify exactly which obligation becomes unfunded. Bring the proposed settlement and current creditor list to your adviser.
Do not sign based only on the relief of ending one dispute. Confirm a responsible, documented plan for the wider business.
Call CRP today about debt recovery and coordinating the appropriate professional support.
