Want to know how to protect funds you put into your own company?
When cash is tight, many owners reach for their personal wallet to boost funds, rather than acknowledge there is a problem with the cashflow in the business. It is essential if you are putting your money into the company, treat it like a real loan… or expect to sit behind everyone else if your business were to go into a liquidation.
“If your business is in financial difficulty and you’re looking at recapitalising, don’t put in a cent without proper advice. Get the documents right so your position actually stands up,” says Liam Bailey, Managing Partner at O’Brien Palmer.
Here is the minimum you should do:
- Loan agreement in writing: amount, interest, repayment terms, events of default.
- General Security Agreement (GSA): then register on the PPSR correctly and on time.
- Evidence: bank transfers from you to the company, or invoices you paid for the company.
Keep simple but detailed records that proves the debt.
Here is what you shouldn’t do:
- Don’t try to secure old money after things go bad. (As Sarah explains “You cannot ‘whack a PPSR on’ retrospectively for historic advances and expect it to hold. You need the GSA and PPSR at the time funds go in.”)
- Don’t assume a bare PPSR fixes everything. Without a signed GSA, your registration is vulnerable.
- Don’t forget existing bank covenants. Check your facility terms before granting new security.
Why timing matters:
If a security is created while the company is insolvent or as creditors close in, a liquidator can attack it as a voidable transaction.
“We often treat last-minute securities as if they were never there,” says Liam.
Quick checklist before you fund the company again:
- Do I have a signed loan agreement and GSA ready?
- Have I checked bank covenants?
- Will the PPSR be lodged immediately and correctly?
- Do I have clean evidence of each advance?
Need to Talk?
If you’re overwhelmed and need to understand your options, our team is here. We’ll explain your rights, your responsibilities, and help you take the first steps to secure any money that you wish to loan to your own business.
O’BRIEN PALMER (Insolvency)
📞 Call Liam Bailey: (61) 2 9232 3322
📧 Email: obp1@obp.com.au
HICKSONS HUNT & HUNT (Legal)
📞 Call Sarah Scappello: (61) 2 9391 3113
📧 Email: scappello@huntsnsw.com.au
STAY TUNED FOR PART 2 NEXT WEEK!