|Business Rescue processes||The most common insolvency solutions for companies are: voluntary administration, liquidation and receivership.||ASIC|
|Secured Creditor||A secured creditor has security for a loan. Security is an asset promised to guarantee the repayment of a debt. Security is intended to cover the debt amount if the debtor can’t pay it back. see also PPSR||ASIC|
|Registered Liquidators||Listed by ASIC||ASIC|
|Deed Of Company Arrangement (DOCA)||Regulation 82 discusses the special situation of a Creditors Trust||ASIC|
|Liquidator Duties||The liquidator is appointed to:|
- collect, protect and realise the company’s assets
- investigate and report to creditors about the company’s affairs, including any unfair preferences that may be recoverable, any un-commercial transactions that may be set aside, and any possible claims against the company’s officers
- inquire into the failure of the company and possible offences by people involved with the company and report to ASIC
- distribute the proceeds of realisation – after payment of the costs of the liquidation, and subject to the rights of any secured creditor – first to priority creditors, including employees, and then to unsecured creditors
|Voluntary Administration||Voluntary administration is a process designed to resolve the company’s future direction quickly, hopefully without liquidation.|
An independent qualified insolvency professional (the administrator) such as Bob Jacobs from Auxilium Partners (LINK) is appointed to control the company to work out a way to save either the company or the company’s business. Based on his/her examination of the company’s affairs, the administrator may be able to restructure the company utilizing a Deed of Company Arrangement (DOCA)LINK. If it isn’t possible to restructure the company or its business, the aim is to administer the affairs of the company in such a way that results in a better return to creditors than they would have received if the company had been placed straight into liquidation.
Putting a company into voluntary administration can be done by director/s calling a meeting of the board of the company, resolving that the company is insolvent, or likely to become insolvent, and resolving that a suitably qualified (should be a registered liquidator) voluntary administrator should be appointed.
|Receivership||A company most commonly “goes into receivership” when a receiver (licensed liquidator) is appointed by a secured creditor who holds a security interest in some or all of the company’s assets. |
The receiver’s primary role is to collect and sell enough of the company’s collateral (property) to repay the debt owed to the secured creditor. The court may also appoint a receiver over a company’s assets.
|Deed Of Company Arrangement (DOCA)||A deed of company arrangement or DOCA may be agreed to as a result of the company entering voluntary administration. The document aims to maximise the chances of the company, or as much as possible of the company’s business continuing, or to provide a better return for creditors than an immediate winding up of the company, or both.|
A formal agreement is created between all participants in a company outlining the way to move forward and to share out a definite amount to creditors. A DOCA is designed to give the business time and a formal structure to continue to trade on in a profitable way.
|Administrator Appointed||The purpose of liquidation or administration of 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.||ASIC|
|ASIC||Australian Securities & Investment Commission: insolvency terms explained||ASIC|
|Insolvency||An insolvent company is one that is unable to pay its debts when they fall due for payment. When a person is unable to pay their debts please consult AFSA for information about bankruptcy and personal insolvency agreements.||ASIC|
|Insolvent Businesses||Listed by ASIC||ASIC|
|Personal Insolvency & Bankruptcy||If you yourself are unable to pay your PERSONAL bills please consult Australian Financial Security Association for information about bankruptcy and personal insolvency agreements.|
|AFSA||Australian Financial Security Association manages bankruptcy and personal insolvency agreements if you are unable to pay your bills.||AFSA|
|ARITA||Australian Restructuring Insolvency & Turnaround Association is Australia’s leading organisation for restructuring, insolvency and turnaround professionals with good explanation of insolvency terms||ARITA|
|Safe Harbour in 2020||Amendments to s 588GA(1) of the Corporations Act 2001 (Cth) are designed to provide further relief for financially stressed businesses, during COVID-19. There is now an additional 'safe harbour' from insolvent trading liability in respect of debts incurred during the six months March to September 2020 in the ordinary course of the company's business' (COVID Safe Harbour).||ARITA|
|PPSR||Personal Property Securities Register is administered by the government and exists to protect creditors. Personal property is an asset other than land and includes, cars, boats, business inventory, copyright, patents, bank accounts and debts. If you have registered your property on PPSR you are a secured creditor.||PPSR|
|Unsecured Creditor||An unsecured creditor does not have security for a loan. eg. Propery not listed on Personal Property Securities Register.|
NB. If you are in business Personal Property = GOOD/ASSETS and the Securities Register = DEBT
|Creditor||You are a creditor of a company if the company owes you money. A creditor is owed money by a person or company (the debtor). Creditors are usually lenders, suppliers of goods, retail customers and sometimes employees||ARITA|