Insolvency is when a debtor cannot repay his debts. The common types of corporate insolvency include voluntary administration, liquidation and receivership. If a person, not a company, is insolvent personal procedures that apply include bankruptcy and personal insolvency agreements.
- ongoing losses;
- poor cashflow;
- unpaid creditors outside usual trading terms; and
- problems obtaining finance.
If the above list sounds familiar, then you may want to seek legal advice which may assist with increasing the chances of the company surviving.
The company is insolvent
If your company is insolvent, do not allow it to incur any further debt. It is best to call upon a voluntary administrator or a liquidator to assess the situation.
Trading while insolvent
If you continue to trade while your company is insolvent there are a number of penalties that are associated such as civil penalties, compensation proceedings and criminal charges.
Assisting an external administrator
As the director of the company you must assist any external administrator whether it be a liquidator, receiver or administrator with any information they require relating to affairs, reports, information and other details.
This information is to be used as a guide only. If you require legal advice please contact our team today stolaw.com.au or 1300 STOLAW.
(Source: Australian Securities and Investments Commission, 2014, http://www.asic.gov.au/asic/asic.nsf/byheadline/Directors+and+insolvency?openDocument)