How can a simple address error lead to personal bankruptcy? In this critical episode, Darren Vardy reveals the hidden dangers of registered office management and shares real-world examples of directors who nearly lost everything due to address management failures. Learn about the shocking case of a national IT company director who received a $1.8 million DPN on day 20 of the 21-day deadline because his accountant acted as a mere mailbox. Discover another cautionary tale where a liquidator's office failed to forward a lockdown DPN, leading to $50,000 in legal fees and potential bankruptcy proceedings. Darren explains why physical mail is still the legal standard, the critical importance of reviewing your annual ASIC return, and practical steps every director must take to protect themselves from these preventable disasters.

KEY TOPICS COVERED:

• The role of registered agents and registered offices • Why accountants acting as mailboxes create dangerous situations • Real case study: $1.8 million DPN received on day 20 of 21-day deadline • How address management failures nearly caused personal bankruptcy • The importance of reviewing ASIC annual returns thoroughly • Case study: Liquidator office failure leading to $50,000 in legal costs • Lockdown DPNs for superannuation guarantee charge (SGC) • Why physical mail is still required for legal notices • The substituted service process when personal service fails • How address changes during liquidation can create problems • The onus on directors to maintain current ASIC records • Why focusing on ASIC invoice payment isn't enough • The importance of acting swiftly when receiving any ATO notice • Consequences of waiting until day 21 to seek advice

KEY TAKEAWAYS:

✓ Using your accountant as a registered office can be dangerous if they act as a mere mailbox ✓ Directors must verify their registered address on ASIC records regularly ✓ Annual ASIC returns should be reviewed thoroughly, not just paid quickly ✓ A $1.8 million DPN was nearly missed because the director was overseas and the accountant didn't escalate the notice ✓ Liquidator offices may not forward DPNs to directors, creating unexpected personal liability ✓ Physical mail is the legal standard - email notification is not automatic ✓ Address changes during liquidation can result in directors' addresses being changed to the liquidator's office ✓ Lockdown DPNs for superannuation can only be resolved by paying in full ✓ Legal proceedings can cost $50,000+ when DPNs aren't addressed proactively ✓ Directors should act immediately upon receiving any ATO notice, not wait until day 21

Who Should Listen: Business owners, company directors, lawyers, accountants, and anyone wanting to understand financial distress warning signs.

About the Host:

Darren Vardy - Managing Director of Insolvency Options and Registered Liquidator with over 30 years of experience in business recovery and debt solutions. Darren has helped thousands of businesses and individuals navigate financial distress and find practical solutions to complex problems.

Connect With Us:

• Website: insolvencyoptions.com.au  • Phone: 1800 463 328 • LinkedIn: https://www.linkedin.com/in/darrenvardy/

Subscribe & Follow:

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Co-host: Anthony Perl

Produced by: Podcasts Done For You

Director penalty notices, real world case studies and lessons.

2

Welcome to IO Insolvency Options

with Darren Vadi, the managing

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Director of Insolvency Options

and a registered liquidator.

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With over 30 years of experience

helping businesses and individuals

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navigate financial challenges.

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In today's episode, Darren Shares

shocking real world examples of

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directors who nearly faced personal

bankruptcy due to outdated asset

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records and registered agent failures.

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He reveals how a $1.8

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million DPN was avoided with just one

day to spare, and how another director

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faced $50,000 in legal fees due to a

liquidator administrative oversight.

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You'll learn the critical

importance of registered office

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procedures, why accountants must.

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Be more than just mailboxes and

the devastating consequences of

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not keeping your details current.

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I'm your co-host, Anthony Pearl.

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Let's dive into unlocking

more about insolvency options.

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Darren, let's just get a little bit

more into the DPN situation because

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I think this is an important topic

that we need to have a look at.

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In a little bit more detail.

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We touched on before about the

notices going to in a previous episode

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about going to people's addresses

and making sure their asset records

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and things need to be updated.

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I mean, talk to me about registered

agents and how that works as well and

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getting deeper into this process, because

there's a lot of people out there who are

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potentially, are directors and are not

familiar with how all of this is working.

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Darren Vardy: Sure.

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So what we've experienced

over time is that.

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From time to time, the registered

office of the company and or the

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ASIC registered agent can be the

company's external accountant.

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So in that regard, the company's

external accountant becomes the company's

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mailbox for all important documentation.

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Now, uh, be it ASIC documentation

being legal documentation, because when

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documents are served on a legal basis,

they are served on the registered office.

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So.

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It's really important that the external

accountant and their staff understand the

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role of being a registered office and as

agent, and the fact that they're not just

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a mailbox for their clients where they

receive communication in and post it out.

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We had a matter.

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In Brisbane, a national IT business

where the actual address for the

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directors was care of the accounting

firm or care of the registered office.

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So in that instance, we were

confronted with a situation where I

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was contacted on the 20th day, which

was on a weekend by the director

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saying that he had received a director

penalty notice and he needed to act.

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To appoint me as an

external administrator.

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Now on the Monday, we quickly affected

the appointment, so we affected the

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appointment on the 21st day, which allowed

him to avoid any personal liability.

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But when we went back and had a look

at why the director had received the

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notice on the 20th day or thereabouts,

what we found was that the director's

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address was the external accountant.

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The external accountant's office

had received the director penalty

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notice and which was received

by in by the receptionist.

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The process of the external accountant

was that any communication that

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came in was then readdressed and re

enveloped and sent out to the director.

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The documentation wasn't notified

to the client partner of the firm.

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It was just a process where documents

would come in, documents would go out.

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Now in this instance, the director

was away overseas on work commitments,

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and he'd only returned home that

particular weekend to find the director

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penalty notice in his personal mailbox.

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Now, that came at some quite of a shock

to him because whilst being away, he'd

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actually been in contact with his external

accountant whilst overseas because he

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was overseas looking at a new project.

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And he was on the phone to his

accountant talking about the potential

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profitability and running some financial

models in respect to the project.

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So whilst personal liability was avoided,

but for a day or two, it could have been a

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whole different scenario or circumstance.

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Now, the value of this director

of penalty notice was about $1.8

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million with the total ghetto in two.

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The tax office at that

point in time was $3.3

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million.

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So for the sake of a, as I said, for

the sake of a couple of days, this

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director could have been significantly

financially disadvantaged by virtue

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of the addresses that were listed with

asic, and by virtue of the process

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employed by the external accountant,

enacting simply as a mailbox and not.

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Elevating the seriousness of the notice

to the, uh, client partner of the firm.

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Anthony Perl: I think there's a lot of

lessons here to go through and learn,

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and I think let's just start up with

the basics in terms of, uh, director,

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one of the first things I gather you

should be doing is, first of all, working

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out what actually is your registered

address with ASIC in the first place?

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Darren Vardy: Correct.

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And that is just a simple search of

the ASIC register every 12 months.

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ASIC will issue an annual return, and

that will have the company's details

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on it, directors, shareholders,

registered office, principal

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place of business, and the like.

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So whilst a lot of companies simply

receive that document from their

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external accountant or ASIC agent,

pay the necessary fee to asic.

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It's very important that everyone really

looks at that annual return document to

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ensure that the addresses are correct,

because if they're not and there is say,

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some legal documents that need to be

issued and they're being issued to an

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old address, well then all of a sudden

what you can find is that you can be at

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the end of a piece of litigation without

your knowledge and trying to defend.

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The fact that you never

received any documentation.

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I have a situation with a friend

of mine actually, which is not

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dissimilar, where what happened to

him was that he had a superannuation

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debt outstanding at the time that his

company was placed into liquidation.

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Now, what he found was that.

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A TO had subsequently issued A

DPN in respect of SGC, which is

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outstanding super, or what they call

superannuation guarantee charge.

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Now, this was one of those lockdown D pns.

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The notice in this instance was actually

issued to the liquidator office.

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Now the liquidator office upon the

appointment of the liquidator, had changed

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the registered office to the liquidator

address, and that's not uncommon.

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But it was also found that because

the director's address was listed

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as the registered office, the

director's address had changed

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to the liquidator office as well.

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The problem, however, in this instance,

is that when the director penalty notice

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was received by the liquidator office,

staff of the liquidator simply folded

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the document because the company was

in liquidation and they did not notify.

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My friend, the director, so I would say 18

months to two years later when doing his

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personal tax return, his tax accountant

noticed there was a new debit account on

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his personal profile on the tax portal,

which related to the company's SGC debt.

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Now, his accountant made some inquiries

and only to find out that the a

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TO had formally commenced recovery

proceedings to recover the money, and

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they were actually trying to locate him.

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As his residential to serve to

personally serve him with legal

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documents because the current

residential address was not correct

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and since liquidation, he'd actually

moved residential addresses anyway.

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So that actually then led to my friend

having to formally engage a lawyer.

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To do with the legal proceedings that were

on foot or had been commenced by the A TO.

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Whereas if the DPN had have been passed

on by the liquidator office 18 months

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earlier, what he could have done was

engage proactively with the A TO and

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organize a repayment arrangement for the

money's owing as opposed to having to

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formally spend money with lawyers to.

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Defend the proceedings, but essentially

come to the same outcome, which was

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organize a payment arrangement to repay

the debt, a much more expensive outcome

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once you start employing lawyers.

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Correct.

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And the outcome was north of

$50,000, so we're not talking

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insignificant amount of money.

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And that was the cost of lawyers to

deal with the proceedings as opposed

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to him Just deal with the a TO

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Anthony Perl: directly.

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And what would've been the consequences

if he was had not employed the lawyers?

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How would that have played out?

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Darren Vardy: Well, the consequences

would have been is that it

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would've been far more difficult

for him to get to an outcome.

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But I think the real consequences

would've been is that if he had

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not have become aware of the SGC

debt on his personal profile on the

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HEO portal via his new accountant.

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Consequences could have been that once

the A TO had located his current place

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of residence, they could have personally

served him with a bankruptcy notice,

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which was the final stage in their

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Anthony Perl: recovery process.

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Big consequences when you start

going down that path, particularly

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if it couldn't be avoided.

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Correct?

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Darren Vardy: Correct.

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And then, you know, having been

issued with a bankruptcy notice.

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There is only very limited

time to then deal with same,

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which will add to more costs.

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So ultimately he would've had to incur,

he would've had to engage a lawyer and

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incur far more legal fees to deal with.

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Setting aside a bankruptcy notice,

then going and dealing with the

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taxation office to get to the

ultimate outcome which was achieved.

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Anthony Perl: So in this particular

case, or in various cases, how much

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emphasis is there on accountants to

actually make sure that the records are

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up to date and they're not just acting

as a registered office effectively?

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Darren Vardy: Well look, the onus does

come back, in my view, back to directors.

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My experience is that accountants will

issue the annual return notice each year

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to ensure that to the director clients

and ask them to ensure that the all the

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details in the annual return is correct.

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IE make sure that

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Anthony Perl: the addresses are accurate.

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And I think that's one of

the key things, isn't it?

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Because often when you get information

from an accountant, the first thing

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you're focusing on is little things

like how much money you're owing

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and the bits and pieces in between.

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But something as simple as an

address can be easily overlooked.

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Darren Vardy: Correct.

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And when the accountant sends

out the annual return, it does

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come with the ASIC invoice.

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And the ASIC invoice may be for 60 or $70.

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So quite often people focus on.

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I need to pay this ASIC invoice by the

due date, otherwise I'll get a fine.

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Let's get that paid.

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But they don't look at the actual

return, which can be far more important

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Anthony Perl: in these circumstances.

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Yeah, it's a very important point, and I

think I want to emphasize something that

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you mentioned earlier on as well, is that

it's all about physical addresses, and

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why is it that they don't use emails?

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Because emails don't change

as often as addresses do.

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Look, this is a

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Darren Vardy: legal thing.

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The majority of legal notices when

we are dealing with the recovery

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of debt must be personally served.

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When it comes to individuals.

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If an individual cannot be personally

served, an application can be made to

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the court for what's called substituted

service, whereby evidence is provided

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that you've attempted to serve an

individual at the last known address.

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You had that individual's alternate

address or email address, and you

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can actually apply to the court to

serve via email, but it's something

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that can only be done after you have

exhausted all efforts to personally

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serve them at the last known address.

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Anthony Perl: And certainly from

a director's point of view though,

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that's the key is, is that you're

not going to get things in an email.

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You're not going to get a phone call.

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You're just going to get

something physically.

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So if you haven't kept that up to

date, then the onus is on you, correct.

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This is true.

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Just wrapping up this discussion

directly, and I guess the outcome

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for your friend was obviously as

positive as it can be in the end,

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and is that something that is common?

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What are the steps that people

should be taking other than

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getting your address right?

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Darren Vardy: Look, it all comes back to.

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At swiftly if any of these notices

are received, it's a matter of

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acting immediately and not waiting

till the 21st day to seek advice.

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Anthony Perl: And that's all we

have time for in this episode.

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But next time on IO Insolvency

Options, we'll explore a detailed

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case study of a national IT company.

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Facing a $1.8

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million directed penalty notice, Darren

will walk you through the entire voluntary

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administration process from emergency

appointment to successful deed of company

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arrangement revealing how creditors

receive 66 cents in the dollar instead

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of just 33 cents through liquidation.

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It's a masterclass in business

rescue you don't want to miss.

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For details on how to get in touch

with Darren and his team on insolvency

218

challenges, please consult the show notes.

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This podcast is produced by my

team at podcast done for you.com

220

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share their expertise through

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If you found value in today's episode,

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Until next time, remember, there's always

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