Insolvency deals with companies that are unable to pay their creditors based on an overall assessment of the companies cash position. It is critical to understand that this is to be distinguished from a temporary lack of cash-flow or liquidity.

A company is insolvent, similar to a person being bankrupt as you can see from the table below alot of the processes are similar

What to do if you suspect you may be or become insolvent

You must seek professional accounting and legal advice as soon as possible, as this will increase the likelihood of the company being able to survive. Often the difference between a company that is able to survive and one that is not is only a factor of time that the director took to seek assistance.


Voluntary Administration

Voluntary Administration can assist in resolving a company’s future quickly when used correctly and at an appropriate time. Once a company is placed into voluntary administration the directors will appoint a voluntary administrator. This person takes full control of the company to determine if the business is able to be saved.

The administrator must then decide if the company can be:-

  • effectively saved where, the voluntary administration end sand return the company back to the directors’ control OR
  • Approve a deed of company arrangement through which the company will pay all or part thereof of its debts OR
  • Wind up the company and appoint a liquidator.



Once a company decides or is forced to liquidate a independent liquidator takes control of the company so that its affairs can be wound up in an orderly and fair manner.

The liquidator will sell the company’s assets to pay creditors in accordance with the order of priority under a deed or the Corporations Act 2001.



A company typically enters receivership when a receiver is appointed by a secured creditor who holds a security interest in some or all of a companies assets. The receiver’s role is to collect and sell enough of the companies property and/or stock to repay the debt.



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