Farming Companies & Liquidation by Banks – BE AWARE!

Companies are great ownership structures for farms and farmers. But the rub comes when the Bank decides to foreclose. Recently I was out assisting some farmers who had all their assets in a company. The Bank had been annoying them for some considerable time, but clearly had lost patience and decided to act without further advising the clients.

As I drove out the gate the Receivers drove in and the company was put into liquidation. The Receivers had a farm consultant with them to cover animal welfare and stock health issues. The farm had a herd of winter milkers and was integrated with the neighbours, so the impact was huge.

The difference between a foreclosure on a farming company as compared to a Partnership or Family Trust is that with a Partnership or Trust, the bank will serve notice that they are going to call up the mortgage. With a company the receiver may walk in unannounced. There appear to be few rules for liquidators or receivers: they do it "their" way, not yours.

Once the Receiver is in you have no say, no control, nothing! All your assets are frozen as are all your company accounts. The receiver is in control. Security guards may be posted on the gates. The only good news is that the bank interest stops accruing.

So if a forced sale is inevitable, do something: get good advice, accept it, and take action. Do not hunker down and hope it will go away, because it won't. Doing nothing is not a solution.

The receiver will give you a limited time to solve your financial problems. After then the receiver will sell the farm as he sees best. Receivers are often not that understanding of farming and its complexities, and issues will inevitably arise.

This story is not saying companies are a bad thing. It is just highlighting what can happen when "the balloon goes up". If you have a farming company and the bank is making noises, listen to them. You must take action before they take control. Once the receiver arrives it is too late – you are powerless.


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