If you are doing business with small to medium sized companies and providing them with a credit facility of anywhere between $5,000 to $150,000, then an ASIC business name search and company search is extremely important.

We will discuss steps you can take to reduce the risks of being swindled by corrupt operators and unreliable directors due to their limited personal experience. This article is not personal advice, simply a discussion paper.

As a consumer or small business owner, you need to ensure that your interests are protected when you deal with other businesses. Good business ethics requires you to know certain information about the business you are forming a business relationship with and seek confirmation that the credit application information you are provided by the Applicant is true in all aspects.

The first thing you do prior to doing business is provide the company and business with a Credit Application Form to fill out with appropriate detail and return signed by the company directors. You should then proceed to do an ASIC Business Name Search and/or an ASIC Company search to verify this “Credit Application” information.

By conducting an ASIC search you can verify that the company or business name is registered and by doing an ASIC search by company and business name rather than searching by an ACN, ABN number, it may establish that the same name is registered as a business name and also as the company name. Occasionally you find a name search shows a result whereby you have the same search name used in the business name and the company name with different owner in each case. The same name can only be owned by one entity (or one person).

The ASIC search will offer the date the company was incorporated and may give you some idea about the stability of the company. For instance if the registration of the company was January 1992, you immediately know they have been doing business and accumulating business and financial experience for 21 years. If registration was January 2013 you immediately are on alert for such things as limited business and financial experience, alternatively these directors may have had a company that was liquidated and deregistered and are simply registering another company of similar name.

Detail is available on the directors and shareholders which will give more clues about the company stability. Frequent changes to directors and shareholders can point to problems and instability within the company. In the instance of small companies, director information such as date of birth and address can tell you whether the same address shown as the business address is that of their home address. This would indicate a business being run from home. The date of birth is important, for instance, if it shows the director’s age as 28 years, is that sufficient time for him/her to have developed his/her business and financial management skills?

Should you minimise your exposure on credit or alternatively seek a guarantee from the directors? Is the shareholder the same person as the director and if so would it be as secure as a family company which details the husband and wife jointly as the directors & shareholders? Would the joint director/shareholder offer you greater confidence in doing business with them?

In the detail of the ASIC search look for such statements as “Charge over the assets of Company” or detail listing changes to directors and shareholders.

An ASIC personal name search on the directors and company officers will show which other companies each person is involved in. This may help you form an opinion about their business background. If the directors have been involved in other failed companies, it is a strong warning sign.

Brodie Collection Services is one of Australia’s leading debt collection firms, with offices in Adelaide, Sydney, Melbourne and Brisbane. They can provide ASIC search services from a low $46.50. They also provide debt collection services on a no collection, no charge basis. You can trust them with all your debt recovery needs. Visit our website to find out more about the debt collector services that are offered by Brodie Collection Services or call us on 1300 276 343.

This information provides a general summary only and is not intended to provide specific advice for your individual circumstances. It is not a substitute for professional advice and should not be relied upon as such.