People going into business often obtain advice from professional advisers about how to structure the business. For example, should they operate as sole traders, in partnership, through a company or through a trust? Some professional advisers, especially accountants, have been known to recommend a structure based on tax minimisation and nothing more. That advice is not always consistent with a sound asset planning strategy.
This book analyses different structures from the perspective of asset planning. It reviews the legal system in Australia with a view to answering the question what happens to personal assets when business fails?
One specific question addressed is what happens to the family home if an entrepreneur becomes bankrupt.
The book offers a road map for professional advisers who face questions from their clients; questions like:
- Is money in my superannuation fund safe?
- What about the assets of a discretionary trust of which I am one of the beneficiaries?
- What happens to gifts made before I went bankrupt?
- Does the Family Court have a role to play if there is a relationship breakdown?
- Can my relatives change their wills so that their money goes to family and not to my creditors?
- And also, for the professional adviser, what are the legal and ethical obligations in tackling these issues?
This is not a text book, although there is some technical material included. The intention is to offer the professional adviser guidance in clear, non-technical narrative, on issues that are sometimes complex. The intention is also to alert advisers to matters they might not have considered when advising their clients.
Part A – Introduction – Identification of the problem
Asset planningRisky business
Part B – Structuring
Structuring optionsTesting structuresMulti-disciplinary approach
Part C – The insolvency system
OwnershipPurchase of matrimonial homeBankruptcy Act 1966 (“Act”)Trustee in bankruptcy claim to propertyControlled entitiesTrustsResulting trustConstructive trustMortgage paymentsSubrogationExonerationPowers of trustee in bankruptcy to avoid antecedent transactionsStatute of Elizabeth – without bankruptcy
Part D – Some specific topics, testing the system
Diverted benefitsThe discretionary trustSuperannuationWillsFamily Court
Part E – Ethics
Part F – Some available options and pitfalls
Proper advice and scope of retainer
Part G – Conclusion and checklist
Risky Business shows how the law deals with [the] issues that commonly confront advisers, and how the law also leaves some issues to the winds, with ‘only’ ethics as guidance. Peter Agardy’s readable and knowledgeable account contributes to the on-going debate of the issues involved.
Michael H Murray, From the Foreword
…This work provides the busy legal practitioner, accountant and financial planner with an understanding of structuring options available, their features and how these options have been tested and treated by the Courts…
Anthony Lo Surdo, SC
Peter’s book fills a long standing void in the asset planning market. It meets the needs of both the layperson wanting to implement legally prudent and effective asset planning strategies, and professionals wanting to understand the broader legal and regulatory environment from which asset planning strategies are launched…
Gess Rambaldi, Partner, Pitcher Partners
Businesses fail all the time, but few people plan for such a fate, says Agardy, a barrister with extensive experience in insolvency practice. While this book is aimed at financial advisers, it treads a fine line, given the high-wealth individuals who have been engaged in elaborate plans to defeat creditors. But Agardy says it is small business people who are most at risk. He says there is nothing illegal or unethical about asset planning, but any plan to defeat creditors will always be a risk.
Paul Cleary, The Deal – The Australian Business Magazine, March 2014
The author considers the mechanisms within the insolvency system available to trustees in bankruptcy in order to pursue particular assets and transactions. Practical and useful examples involving scenarios with particular structures are given throughout the text and the language used is clear, with the result that the book will be a useful resource for both the seasoned and inexperienced practitioner. Read full review…
Inprint, Law Institute Journal Victoria, June 2013
John F Kennedy, in his first State of the Union address, said that “while hoping and working for the best we should prepare ourselves for the worst”. This quote sets the scene for this useful outline of asset protection issues for businesses and individuals. In 80 pages it manages to cover a range of relevant issues including structuring options, an overview of the insolvency system, particular issues relating to discretionary trusts, superannuation, wills and family court matters. The practical examples of how different structures might respond in the case of a risk event like death, divorce, dispute, duties and debt is particularly helpful. The complex legal and ethical issues that can arise when advising clients about the limits of the obligation to pay debts are also canvassed. Together with a checklist of issues to consider, this serves as a comprehensive outline for professional advisers.
Catherine Kennedy FCA, Charter, August 2013