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Personal and Corporate Insolvency in Australia

Australia is a Federation of States, but Personal Insolvency is governed by a Federal Law, The Bankruptcy Act, 1966, and Corporate Insolvency is governed by uniform State Legislation, the Corporations Act, 2001.


The Bankruptcy Act 1966 provides a regime for administering the affairs of insolvent persons. The arrangements can be complete bankruptcy, in which a Trustee takes over the financial affairs of the debtor, to less complete but still formal arrangements whereby the debtor either pays instalments or a lump sum, or assigns his property to the Trustee to enable creditors to be paid a dividend and then release the debtor from his debts. The Trustee can be either the Official Trustee in Bankruptcy, a Government servant, who operates through the Insolvency and Trustee Service, or a private Trustee, who is a Chartered Accountant.

Bankruptcy can be initiated by a creditor, or by the debtor personally. Action by creditors usually result from the debtor failing to comply with a Bankruptcy Notice, which is based on a Court judgment, and requires payment of the judgment within 21 days of service of the Notice.

Our work involves both making a debtor bankrupt and assisting the Trustee in Bankruptcy administering the Estate, in areas including Public Examinations, Search Warrants, Transfer of Land Titles, Caveats on land and recovery of assets and void dispositions of property prior to bankruptcy.


Corporate insolvency also has a number of aspects.

The Directors of Companies are under a statutory obligation not to allow the Company to trade whilst insolvent. They may be personally liable for the Company’s debts if they allow it to so trade. Winding up proceedings can be taken in Court, either on the basis that the Company is actually insolvent, or by it being deemed to be insolvent by its failure to comply with a Statutory Demand for payment of a debt. This demand does not have to be based on a judgment, although if not, evidence is needed to state that there is no genuine dispute about the debt. The Company can also be wound up by a resolution of either the members of the Company, or its creditors.

In any event, a Liquidator, who is a registered Accountant, is appointed to take control of the Company’s assets and affairs, and distribute the proceeds to creditors. The Company is then dissolved.

If it appears that there is some likelihood that the Company could trade out of its problems, the Directors can appoint an Administrator. The Administrator calls a meeting of Creditors, and there puts a proposal to enable the Company to carry on business. If the proposal is accepted, the Administrator hands control of the Company back to the Directors. If not, the Company is wound up.

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