Phone: (02) 9689 2266 Email  Email Us  Subscribe to Newsletter Search Site:   Search

Severe Consequences for Shady Pre-Insolvency Advice

Peter Hillig

01 Dec 2021

The Australian Investment and Securities Commission (ASIC) recently announced the outcome of a case against Richard Ludwig, the operator of a Queensland based telecommunications company.

During an investigation into Ludwig’s business, Cap Coast Telecoms, it was discovered that a firm of pre-insolvency advisers appointed by Ludwig were issuing fictious invoices worth hundreds of thousands of dollars from companies they had set-up just before Cap Coast’s liquidation.  

The invoices (worth over $740,000) were paid by Cap Coast before going into liquidation and the cash was then re-distributed to various accounts controlled by Ludwig.

After a tip-off by the liquidators, ASIC investigated the collapse of Cap Coast Telecoms.  During the investigation, emails from the pre-insolvency advisers to Ludwig were discovered, outlining the elaborate plan, and detailing the ways in which they could (a) avoid Ludwig paying various debts and taxes, and (b) protect his assets after the liquidation of Cap Coast.

The investigation resulted in the prosecution of both the pre-insolvency advisers and Richard Ludwig for their fraudulent scheme to strip the company of its assets.

The two owners of the pre-insolvency advisory firm have received prison sentences of five years and four-and-half years respectively for dealing with the proceeds of crime.  Richard Ludwig is currently awaiting sentencing in December for intentionally dealing with the proceeds of crime, and ten counts of breaching his director’s duties in relation to the money laundering charge.

Key Takeaways

The Federal Government has already signalled its commitment to overhauling insolvency laws in Australia with new initiatives relating to safe harbours for directors and corporate restructuring. It will be focussing on other legislative changes moving forward that will help to curb the increasing influence of ‘dodgy’ advisers.  Currently, pre-insolvency advisers are unregulated, and there are  many unqualified and “dodgy” operators providing services, often to the unwitting.

If your clients are considering ‘shady’ deals suggested by pre-insolvency advisers to get around an orderly insolvency administration, there are severe consequences for anyone involved. Always ensure the advice your clients are following is from a reputable source.  We would be pleased to help you or your clients navigate their way through what is often a very difficult period for those involved in running a company that is under financial stress.

Be wary of those that offer solutions that are too good to be true!

News & Updates

Director Identification Number Regime Now in Place Read all
Severe Consequences for Shady Pre-Insolvency Advice Read all
ATO - Change in Debt Collection Approach - Directors Beware! Read all
Director Resignation Changes Read all
Small Business Restructuring Reform Read all
Alert to Advisors - Potential Personal Liability Read all
Covid-19 Safe Harbour Protection for Directors Read all
The Dangers of Lending to Loved Ones Read all
Impending Changes to the DPN and PPSR Update Read all
Recent criminal changes to the Director Penalty Notice Regime Read all
Gaol Time for Delinquent Company Directors / PPSR Update Read all
When is a Guarantee Not a Guarantee? Read all
Illegal Phoenix Operations & Determining Right to Income Read all
New & Proposed Legislative Changes Read all
Voidable Property Transfer & Director Liability Read all
Welcome to New Partner and Reforms to Insolvency Law Read all
ASIC Statistics and Enforcement Read all
Government Targets Foreign Investors with New Tax Legislation Read all
Dodgy Advisers – Watch Out! Read all
Steering the Ship onto Rocks: Directors Flouting Obligations Read all
From the Mining Boom to the Ideas Boom - What it All Means Read all
When is a Debt to the ATO Due and Payable Read all
ATO and Phoenix Activity Read all
Unreasonable Director-related Transactions & PPSA Update Read all
PPS and ASIC Prosecution Read all
Leases and Insolvency Read all
PPS Update Read all
Expansion of Director Liability Provisions (PAYG & SGC) Now Law Read all
Proposed Changes to Corporations Act (Phoenix Activity) and Taxation Act (Director Penalty) Read all
March 2012 PPSA Newsletter Practical Worked Examples Read all
Personal Property Securities Act ("PPSA") Now Law Read all
PPS Reform - Understanding Security Interests: Perfection and Priorities Read all
Tax Changes - Expansion of Director Liability Provisions Read all
Australian Taxation Office - Statutory Garnishee Notices Read all
Major Change to Registering Security Interests – Personal Property Securities Reform Read all
PDF 8 Essential Steps if Your Business is in Distress View
PDF ASIC Information Sheet: Insolvency glossary View
PDF Business for Sale View
PDF Directors Duties in Uncertain Financial Times View
PDF Guidance for Accountants in Public Practice: Helping Clients with Companies in Financial Distress View
PDF Real Estate for Sale - Mascot View
PDF Real Estate for Sale - Vineyard View
PDF Solar Energy Business View

Cover of Excellence
Liability limited by a Scheme approved under Professional Standards Legislation