Part and parcel of being advisers in insolvency matters is dealing with unpaid accountants.
It is surprising the number of accountants who do not have properly formed engagement documents.
Without a proper letter of engagement the accountant can be left as another unsecured creditor with limited rights to claim a lien over files.
- The letter of engagement needs to cover all entities that you work for.
- Who is paying the bills and who remains liable if the first person does not pay needs to be clear.
- There should be a charging clause that gives you security over the assets of the clients.
- The charging clause should support a registration on the PPSR.
- Personal guarantees should be part of any new client engagement- standard practice.
- The Australian Tax Agents Board and the Code of Ethics for Professional Accountants each place restrictions upon what documents you can hold a lien on in the event of a dispute. Your engagement letter can help swing the lien back in your favour. (NB s288 of the Corporations Act 2001 will still allow directors to inspect hard copies of the financial records no matter what.)
- In some instances consider getting paid in advance.
- Be aware that if your engagement letter is in order you may be a secured creditor- be wary of lodging proofs of debt.
- The right to withhold books and records from liquidators and trustees in bankruptcy can be a bit trickier. Of course, if you have the right engagement letter in place you have maximised your chances of being paid.
Need some help? Give us a call, only to happy to discuss your situation.
Bruce Pasetti 07 3152 4402