Insolvency
(a) An insolvent person or business is one that is unable to pay its debts when they fall due for
payment.
(b) For banks, the insolvency of their customers can be significant in terms of the ability of the
customers to repay their debts.
(c) Where the customer is insolvent and the debt cannot be re-negotiated, legal enforcement may
be necessary. In the event of insolvency of a customer, the choice of insolvency process depends on
the type of customer involved.
For companies, the options are:
Receivership.
Voluntary administration
Liquidation ( winding up)
For individuals the options are different. For those who are
Consumers
Sole traders, or
Partnerships
the personal insolvency procedure may be bankruptcy ( with other alternative available, such as
personal insolvency agreement). For more information on personal insolvencies refer to the AFSA
website. The process is governed by the Bankruptcy Act 1966 (for debts >$5,000).
Various options exist for different types of creditor:
Description of insolvency processes: external administration of companies
The following insolvency processes involve the appointment of an external controller whose
engagement in the company may displace the company’s directors.
All 3 processes described below are forms of ‘external administration’.
Receivership
Voluntary Administration
Liquidation
(a) An insolvent person or business is one that is unable to pay its debts when they fall due for
payment.
(b) For banks, the insolvency of their customers can be significant in terms of the ability of the
customers to repay their debts.
(c) Where the customer is insolvent and the debt cannot be re-negotiated, legal enforcement may
be necessary. In the event of insolvency of a customer, the choice of insolvency process depends on
the type of customer involved.
For companies, the options are:
Receivership.
Voluntary administration
Liquidation ( winding up)
For individuals the options are different. For those who are
Consumers
Sole traders, or
Partnerships
the personal insolvency procedure may be bankruptcy ( with other alternative available, such as
personal insolvency agreement). For more information on personal insolvencies refer to the AFSA
website. The process is governed by the Bankruptcy Act 1966 (for debts >$5,000).
Various options exist for different types of creditor:
Description of insolvency processes: external administration of companies
The following insolvency processes involve the appointment of an external controller whose
engagement in the company may displace the company’s directors.
All 3 processes described below are forms of ‘external administration’.
Receivership
Voluntary Administration
Liquidation
