Resources

What is insolvency?
Insolvency and consumer rights
Who is a director?
What is bankruptcy?
What is a voluntary administration?
What is a liquidation or winding up?
What is a receivership?
What is a deed of company arrangement?
Insolvency information sheets
Insolvency statistics
ASIC insolvency projects and campaigns

Guidance for liquidators

ASIC Insolvency updates

What is insolvency?

An insolvent company is one that is unable to pay its debts when they fall due for payment.

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. For more information on personal insolvencies please refer to the ITSA website.

Insolvency and consumer rights

Download our information about your rights as a consumer when a company goes insolvent (PDF 31KB).

Who is a director?

A person appointed as a director of a company who is responsible for directing and managing the affairs of a company. Under the Corporations Act a person may also be a director if they are not formally appointed but act in that role, or if the directors of the company act in accordance with their instructions. This is known as a shadow director.

What is bankruptcy?

Bankruptcy is an insolvency procedure that applies to a person, not a company. A person is bankrupt if they have been declared bankrupt under the terms of the Bankruptcy Act and have not been discharged from bankruptcy.

A personal insolvency agreement is an alternative to bankruptcy and for the purposes of the Bankruptcy Act, is where a person enters into an agreement with their creditors without being made bankrupt.

Under the Corporations Act if you are bankrupt or have entered into a personal insolvency agreement you are automatically disqualified from managing corporations and cease to be a director, alternate director or secretary of a company unless you have been given leave by the Court to manage corporations.

For more information go to Bankruptcy and Personal Insolvency Agreements

What is a voluntary administration?

Voluntary administration is an external administration where the directors of a financially troubled company or a secured creditor with a charge over most of the company’s assets appoint an external administrator called a ‘voluntary administrator’.

The role of the voluntary administrator is to investigate the company’s affairs, to report to creditors and to recommend to creditors whether the company should enter into a deed of company arrangement, go into liquidation or be returned to the directors.

A voluntary administrator is usually appointed by a company’s directors, after they decide that the company is insolvent or likely to become insolvent. Less commonly, a voluntary administrator may be appointed by a liquidator, provisional liquidator, or a secured creditor.

What is a liquidation or a winding up?

Liquidation is the orderly winding up of a company’s affairs. It involves realising the company’s assets, cessation or sale of its operations, distributing the proceeds of realisation among its creditors and distributing any surplus among its shareholders. The three types of liquidation are:

court
creditors’ voluntary, and
members’ voluntary.

A creditors' voluntary liquidation is a liquidation initiated by the company. A court liquidation starts as a result of a court order, made after an application to the court, usually by a creditor of the company.

What is a receivership?

A company most commonly goes into receivership when a receiver is appointed by a secured creditor who holds security over some or all of the company’s assets. The receiver’s primary role is to collect and sell sufficient of the company’s charged assets to repay the debt owed to the secured creditor.

What is a deed of company arrangement (DOCA)?

A DOCA is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with, which may be agreed to as a result of the company entering voluntary administration. It aims to maximise the chances of the company, or as much as possible of its business, continuing, or to provide a better return for creditors than an immediate winding up of the company, or both.

Insolvency information sheets

ASIC has a number of insolvency information sheets to assist you if you’re affected by a company’s insolvency and have little or no knowledge of what’s involved.

For further information go to Insolvency information sheets

Insolvency statistics

To track insolvency trends in Australia, ASIC publishes monthly statistics on both the number of companies entering external administration for the first time and the number of insolvency appointments recorded in that period.

For further information go to Insolvency statistics

If you have any queries in relation to the insolvency statistics please email insolvencystatistics@asic.gov.au. Any enquiries from media should continue to be directed to the ASIC Media Unit on 1300 208 215 or email media.unit@asic.gov.au.

ASIC insolvency projects and campaigns

Read summaries and results of our insolvency projects and campaigns

More insolvency

ASIC Website: Printed 05/24/2012

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