Frequently Asked Questions
Corporate insolvency relates to companies, as distinct from individuals, who are dealt with in similar, but different ways.
The Australian Securities & Investments Commission has created some useful guidance for various stakeholders about corporate insolvency that can be accessed on our Resources page.
The signs of financial distress include
- Poor or deteriorating cash flow
- Difficulty collecting debts from customers
- Financial statements that show a history of unprofitable trading or shortages of working capital
- Difficulty paying debts when they fall due
- Non-payment of statutory taxes or employee superannuation
- Banking overdraft and other finance facilities at their limits
- Creditors attempting to payment of outstanding debts
If there is a suspicion of insolvency, a director should consider the interests of all stakeholders, including employees, suppliers and other creditors.
There are serious consequences for breaching general director duties and the duty to avoid trading whilst insolvency.
The first step to mitigate these risks is to seek proper advice. Get in touch with us today to arrange a cost and obligation free meeting.
That depends on the type of appointment being sought.
- For voluntary administration, the decision to appoint an administrator is most commonly made by the majority of the board of directors.
- For a creditors’ voluntary liquidation, despite the name, it is actually the directors and ultimately the shareholders that decide on that course of action.
- A court liquidation commences upon application by a creditor to a court for the company to be wound up, normally after a Statutory Demand has expired.
- And receivership is started by a party (most commonly a bank) who has the power to do so, normally set out in a loan agreement.
You can read more about the different types of external administrations here.