Liquidation can be initiated either voluntarily by the company's directors and shareholders or mandated by a court. This process is voluntarily undertaken when the business proprietors recognize that the company is, or is on the verge of, insolvency and cannot meet its debt obligations. Opting for voluntary liquidation facilitates a structured disposition of the company's assets, enables thorough investigations into the reasons behind the company's downfall, and ensures an equitable distribution of assets to the creditors.

Voluntary administration provides a means for businesses to tackle insolvency problems with the aim of restoring them to a stable financial state. It's an option typically pursued by forward-thinking directors who recognize early signs of financial distress in their company. During this process, a voluntary administrator assumes control, managing the business, assets, and affairs as if they were the company's directors. This is done with the goal of optimizing the likelihood of the business's continuation. The administration period is temporary, generally spanning 20 to 30 business days.

Yes, if you're operating a business as both the director and shareholder of a company, we encourage you to contact us. Our team is ready to assist and walk you through the necessary steps.

Should a company continue to accumulate debts with its creditors while insolvent, its directors risk personal liability for these debts in the event of the company's liquidation. This liability arises if it's determined that the directors were, or should have been, aware of signs indicating insolvency but still permitted the company to accrue further debt. Additionally, if insolvent trading is found to be deceitful, directors could face criminal legal actions.

Directors should be cognizant of the laws surrounding "insolvent trading," which carry significant consequences or repercussions. If your business is facing insolvency, it's advisable to connect with Worrells for a discussion on legal avenues to rescue your business and to gain clarity on your rights and responsibilities.

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A creditor is a company or individual that is owed money by a debtor (an entity including individuals or a borrower that owes debt).

A creditor's petition involves a request from a creditor, typically submitted to the Federal Circuit and Family Court of Australia, aiming to have an individual officially declared bankrupt by the court. This process also seeks the appointment of a bankruptcy trustee, whose role is to oversee the individual's bankrupt estate, ensuring that it is managed in the interest of the creditors.

When a company finds itself insolvent, it may decide to undergo a winding-up process and appoint a liquidator to oversee and scrutinize its business operations, properties, and affairs. The objective of the liquidator in this situation is to liquidate the company's assets and distribute the proceeds to creditors as partial repayment for the debts the company owes them.

Proof of debt is the procedure used by a creditor of a company or individual to inform the administrator, liquidator, or bankruptcy trustee about the amount owed and the origin of the debt. Creditors who submit a proof of debt typically have the right to participate in important decision-making processes and are eligible to receive a share of any distributions that may occur.

Typically, a creditor is allotted a six-year period to initiate legal action for the recovery of a debt that is due under a contract. In cases where the debt is due under a deed, the creditor has a longer timeframe, specifically 12 years, starting from when the debt becomes payable.

A Deed of Company Arrangement (DOCA) is an agreement outlining the terms settled upon by a company, its administrator, and creditors following a voluntary administration. This agreement is utilised if there is a consensus on restructuring the company’s business, properties, and affairs, or if a strategy to settle creditors' debts through a compromise is in place.

Employee benefits, including wages, superannuation, leave, and termination payouts, are given priority status in insolvency cases under the Corporations Act 2001 and the Bankruptcy Act 1966. This means they are prioritised over other creditor claims during insolvency proceedings.

Furthermore, the Australian government offers the Fair Entitlements Guarantee (FEG) scheme to safeguard certain employee entitlements in cases where a company goes into liquidation. The FEG provides necessary funds to cover unpaid wages, leave entitlements, and termination dues (within specific limits) that employees are due when a company is financially unable to fulfill these obligations. For more detailed information, please reach out to us.