Insolvency
Insolvency is a term that can apply to either an individual or a business, but is more often used in relation to a business or company. A business is said to be insolvent when it cannot pay its debts when they are due. It is an offence if the directors continue to operate and incur more debts when a company is insolvent.
If a company is facing financial difficulties and the directors or creditors believe that it is, or may become, insolvent, it may end up in one of the following types of formal administration:
- Liquidation, also known as winding up;
- Voluntary Administration or Deed of Company Arrangement;
- Receivership.
The appointment of a formal administrator may be voluntary, when it is initiated by the company itself, or involuntary when it is made by a person or organisation that is owed money, or by the courts.
The three most common corporate insolvency procedures are voluntary administration, liquidation and receivership. The personal insolvency procedures that apply to a person, not a company, are bankruptcy and personal insolvency agreements.
Please visit the below website or give us a call if you think your company will be insolvent.
http://asic.gov.au/regulatory-resources/insolvency/
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