Congratulations to the entire team at SM Solvency Accountants for reaching the top 5 of insolvency practices (QLD 2018/19) and Brendan Nixon for reaching the top 5 of registered liquidators nationally (and no. 1 in QLD) based on Sivaa Consulting’s FY2018-19 Insolvency Analytics Report of corporate appointments. SM Solvency Accountants is committed to providing accessible, transparent, expert, and timely corporate and personal insolvency administrations.
Company Liquidation involved the sale of company assets through a company’s winding up process. The purpose of liquidating an insolvent company is to have an independent and suitably qualified person (the liquidator) take control of the company so that its affairs can be wound up in an orderly and fair way for the benefit of all creditors.
Ideally, you should commence Company Liquidation as soon as it comes to your attention that your company is insolvent. If you don’t then you are risking a breach of Insolvent Trading laws, which is a criminal offence.
Alternatively your company members may agree to commence Company Liquidation voluntarily even though the company is solvent.
Company Liquidation offers the following benefits to company Directors:
- Upon commencement of a Company Liquidation, the company’s creditors will cease pursuing payment from the Director and instead deal exclusively with the appointed liquidator. This takes the stress of constant harassment and threats of legal action off your shoulders and allows you to move on with your life.
- A Director Penalty Notice (DPN) issued against the company Director will be rescinded if the company is placed into Company Liquidation within 21 days of the date of issue (provided it is not a “knock-down” DPN: speak with one of our consultants for more information or visit our page explaining DPNs by clicking here).
- Any potential for criminal prosecution due to breaches of Insolvent Trading laws will be averted.
- Once the Company Liquidation is complete, the Director will be free to move on to more prosperous future business ventures.
A Personal Insolvency Agreement (PIA) is a flexible way for a debtor to come to an arrangement with creditors to settle their debts without going bankrupt.
The debtor appoints a Controlling Trustee to take control of their property and put forward a proposal to creditors. The Controlling Trustee will examine the proposal, make enquiries into the debtor’s financial affairs and report to creditors.
A meeting of creditors will generally be held within 25 business days of the Controlling Trustee’s appointment and creditors will consider and vote on the proposal. For the proposal to be accepted a majority of creditors and 75% of the dollar value of the voting creditors need to vote for the proposal.
If the proposal is accepted, creditors are bound by the terms of the Personal Insolvency Agreement. If the proposal is rejected creditors will either vote in favour of the debtor being made bankrupt or allow the debtor to decide how they solve their financial difficulties.
Bankruptcy is when someone has a declining financial situation resulting from debts and arrears that they are unable to pay as and when they fall due. In this situation, the best solution is to file for bankruptcy.
Through the natural course of applying for bankruptcy in Australia, a trustee will be appointed who will realise all assets and resources, as well as all creditors and arrears of debts, over a 3 year period. The trustee will then liquidate the estate in order to distribute the liquidated assets among creditors, in a way that is proportionate to the debts owed by the bankrupt – i.e. the creditors with the greatest amount owed to them should receive the highest proportion of any funds recovered.
The repercussions of creditor’s claims can often result in bankruptcy, regardless of whether or not it was the individual’s choice to enter bankruptcy or if it was filed by a creditor. However, filing for bankruptcy is far from the end of the world for the person who undergoes it.
At SM Solvency Accountants we can utilise mechanisms within the Bankruptcy Act that allow us to help you. We will also explain to you the distinctions in legislation with bankruptcy and the alternatives like:
- Part IX
- Part X
All are forms of applying for bankruptcy in Australia and require you to fill in a Statement of Affairs, so DON’T BE FOOLED by claims that Part IX Debt agreements are not bankruptcy: they are an act of bankruptcy and will remain on your credit file for seven years. You will also be placed on the National Personal Insolvency Index for the rest of your life under the term “bankruptcy“. This shows the world that you have been bankrupt and that the type of bankruptcy is a “Debt Agreement”.
People are notorious for entering these type of agreements without understanding the full ramifications of the agreement.
As a Bankrupt, until you are discharged from bankruptcy, you are prohibited from performing certain roles/carrying out certain duties. In addition there are a number of important and compulsory conditions that you must satisfy, which include:
- Making all divisible assets and their relevant information available to the trustee.
- Surrendering your passport/s to the trustee.
- Making all books, records, financial statements available for personal and corporate entities.
- The bankrupt cannot act as a company officer.
- The bankrupt cannot trade under a registered business name without advising the relevant individuals and authorities of their bankruptcy.
For more information: What Effects Will Bankruptcy Have?
A bankruptcy can commence either through a Debtor’s Petition (being initiated by the person in debt) or by a Creditor’s Petition (initiated by the creditor/s).
A Debtor’s Petition is made when a person in a dire financial situation with severe debt has come to the conclusion that the best possible solution for their situation would be to proceed with bankruptcy in order to satisfy their debts. The debtor will also lodge a ‘Statement of Affairs’, which, by law, must include all secured and unsecured creditors, all assets both floating and fixed, and a complete and comprehensive listing of all pertinent information regarding their personal affairs.
A Creditor’s Petition is where a creditor has obtained a judgement on their debt and has subsequently served a “Bankruptcy Notice” upon the debtor. The Bankruptcy Notice will contain an expiry date by which the debtor must satisfy the debt or come to an arrangement with the creditor, or the creditor may file a creditor’s petition to the Federal Court to obtain a sequestration order and bankrupt the debtor.
Even if the value of a person’s assets exceeds their debts, they still may be “insolvent” if they are unable to liquidate those assets in order to satisfy their debts. If a person has debts and is subsequently served with a bankruptcy notice, but is unable to satisfy the terms, then they are then bankrupt regardless of any available assets or funds.