Insolvency for shareholders

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 external administrations are:

  • voluntary administration
  • liquidation, and
  • receivership.

How does insolvency affect me?

Shareholders rank behind creditors in a liquidation, although in some circumstances they can claim as a creditor. As a shareholder, limited information is received from the external administrators of insolvent companies.

If a company is placed into administration or liquidation, shareholders cannot transfer shares in the company without permission from the external administrator or the Court.

As a shareholder of an insolvent company, you can realise a capital loss in certain circumstances:

  • if a liquidator or deed administrator makes a written declaration that they have reasonable grounds to believe there is no likelihood that shareholders will receive any further distribution in the winding up, or
  • if no such declaration is made by the liquidator, the deregistration of a company at the end of the liquidation also enables realisation of any capital loss.

You may wish to seek tax advice about your ability to realise a capital loss if you hold shares in a company which has been placed in voluntary administration or liquidation.

More information

Information sheets

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What's new

ASIC reports on corporate insolvencies 2013 -2014

Read our annual overview of corporate insolvencies based on statutory reports lodged by external administrators for the 2013–14 financial year. 14-254MR. 29 Sep 2014

More releases on insolvency

Latest liquidator registration applications

Latest insolvency statistics

Insolvency notices

View insolvency and deregistration notices on the published notices website.

Video

Jp Illegal Phoenix

ASIC Commissioner John Price talks about insolvency and illegal phoenix activity.

Watch the video

Transcript to come.

Last updated: 17/10/2014 08:03