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BANKRUPTCY & INSOLVENCY LAW

We are experienced insolvency and pre-insolvency lawyers. Sometimes company liquidation or personal bankruptcy is not the only resolution. Timely advice with a strong and results driven mindset from experienced Insolvency Lawyers help you achieve the best outcome.

A company hasn’t paid my outstanding invoice, what are my options?

I was served with a statutory demand. What do I?

I’m thinking about bankruptcy, what are my options?

I am not able to pay an outstanding debt, and I don’t want to be made bankrupt. What do I do?

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Bankruptcy & Insolvency Law

Due to the downturn of the global economy, both individuals and companies are increasingly facing financial hardship. Whilst there may be sufficient assets to pay off any outstanding debts, there may be issues in converting those assets into short-term cash flow in order to meet those debts.

Practice Areas

We provide insolvency advice for businesses and companies and can assist with:

  • Voluntary Administration & Receivership;
  • Deeds of Company Arrangements;
  • Negotiations with creditors and other parties;
  • Statutory Demands, liquidations;
  • Winding-Up Proceedings;
  • Setting aside applications;
  • Voidable transactions;
  • Insolvent trading claims;
  • Unfair preference claims;
  • Directors of debtor companies in protecting their personal assets; and
  • Restructuring Advice.

We provide individuals with bankruptcy advice. If you are an individual facing mounting debts and are not sure how to proceed, we can assist with:

  • Debt Agreements;
  • Negotiations with creditors and other parties;
  • Personal insolvency agreements;
  • Bankruptcy related Court proceedings;
  • Advising on Bankruptcy Notices received by individuals; and
  • Issuing Bankruptcy Notices against individuals.

Company Insolvency

Any business, whether large or small, may find themselves experiencing financial hardship.

 

Both, individuals and company directors face serious legal consequences if they cannot pay debts as they fall due. We are experienced in all forms of insolvency and financial restructuring practices. We secure your assets, and determine the best way to realise their maximum value whilst negotiating repayment terms with your creditors. We are also experienced at representing creditors.

 

It is critical that directors understand their legal obligations, directors’ duties, and what assistance is available to them. Our Insolvency Lawyers can help with developing a strategy and advising of the available options to help guide through insolvency, which often results in better outcomes.

 

We understand the importance of acting quickly, and comprehensively, when it comes to such critical matters. Our objective is to limit and control, as much as possible, the problems that regularly arise when facing a corporate insolvency or personal bankruptcy.

 

Given that issues of insolvency and restructuring often extend into the areas of commercial and corporate litigation, and building and construction related disputes, which our team at Executive Lawyers have extensive knowledge and experience in, we are ready to assist and advise on all aspects associated with corporate restructuring.

Personal Insolvency

We have extensive experience in individual insolvency. We work closely with our clients, their accountants, and financial advisors, to advise on how to best protect their interests, and how to put plans in place to help secure, if at all possible, their financial recovery and long-term sustainability.

 

There are many options available to individuals, including various types of debt arrangements (where appropriate), and bankruptcy, if required. By implementing effective strategies promptly, we will be able to coordinate the best result for your current situation and your future financial security.

Winding-Up and Bankruptcy Proceedings

Whether you are a creditor or debtor, initiating winding up or bankruptcy proceedings may be the only option available to you to recover a debt, or settle debts owed. Our Insolvency Lawyers have extensive experience in all aspects of the winding-up process and can assist:

  • Creditors making a winding-up application in an attempt to recover monies owed;
  • Debtor companies with initiating and managing the winding-up process on their behalf; and
  • Directors of debtor companies wishing to protect their personal assets.

 

Contact us today to review your situation, and advise on appropriate strategies.

What is Bankruptcy?

Bankruptcy is the legal process for a debtor individual to solve their debt problems, or for a creditor to take action against an individual debtor for unpaid debts owed to them. The process involves a trustee to be appointed as administrator of the insolvent individual’s affairs, to provide a fair distribution of that person’s available assets to their creditors.

 

The Bankruptcy Act 1966 protects the debtor individual from being pursued by creditors, and is released from their debts at the end of the bankruptcy, providing the debtor individual with a clean slate.

What is Voluntary Administration?

If a company’s directors form the opinion that the company is insolvent, then the company will be placed by the directors into administration. Voluntary administration is designed to resolve a company’s future, by appointing an independent registered liquidator (the voluntary administrator), who will take full control of the company. This will then provide an opportunity for the directors to implement appropriate strategies to save the company or its business.

 

If it is not possible for the director or a third-party to come up with a plan to save the company or its business, the voluntary administrator aims to administer the company’s affairs to obtain a better return (payment) to creditors than if the company had been immediately wound up.

 

The effect of the appointment of a voluntary administrator is to provide the company with breathing space while attempts are being made to resolve the company’s future.

 

During an administration, creditors have three (3) options:

  • Accept a proposal for a Deed of Company Arrangement;
  • End the voluntary administration and pass control of the company back to the company directors; or
  • Liquidate the company.

 

A company in voluntary administration may also be in receivership.

What is Receivership?

A company will go into receivership when an independent receiver, most commonly appointed by a secured creditor (appointed by the Court in rare circumstances), takes control and usually protects, collects and sells some or all the company’s assets, to repay the debt owed to the secured creditor.

 

A court-appointed receiver may also take control of and sell company property if the court order provides that power.

 

The receiver’s principal duty is to the secured creditor. The main duty owed to unsecured creditors is an obligation to take reasonable care to sell secured assets for not less than the market value or, if there is no market value, the best price reasonably obtainable.

 

The difference between receivership and external administration is that the appointment of a receiver does not affect the legal existence of the company. Whilst the directors of the company remain, their powers will be limited.

 

It is possible for a company in receivership to also be in provisional liquidation, liquidation, voluntary administration or subject to a deed of company arrangement.

What Is Liquidation?

A company will enter into liquidation when the company is no longer in a position to pay their debts, when they became due. Similar to an administrator, a liquidator’s primary role is to take control of the company and its assets so as to wind the company up. Where possible, payments to creditors using company assets will be made.

 

The difference between liquidation and voluntary administration is that the objective of a voluntary administration is to save a company, so that it can continue its operations and continue to trade. In contrast, the goal of a liquidation is to finalise the company’s affairs, cease trading, and if possible, distribute what is owed to creditors.

Corporate Restructures

Corporate restructuring involves revisiting the original structures of the business with consideration given to both succession and estate planning issues.

 

Therefore, business restructuring may be seen as complete overhaul of the business. Whether it is accomplished by selling off assets or reducing pay, and opportunities for future improvements may be identified and harnessed, to strategically benefit the business in a way that supports profitability, and can provide a pathway to its future success.

 

Our Insolvency Lawyers have extensive experience in developing and implementing strategies required to tackle the legal processes and procedures associated with corporate restructures, including administrations and liquidations.

 

We tailor an approach to restructuring your business which best suits your business specifically, by comprehensively understanding your financial situation including the current debts owed, the value and status of the assets on hand, and the ability to generate profit.

 

We offer our clients a range of restructuring options, which include:

  • Debt refinancing;
  • Equity restructuring;
  • Statutory procedures;
  • Asset disposals; and
  • Corporate workouts.

Deeds of Company Arrangement (DOCA)

Insolvency may not be the end of the business and may be an opportunity to restructure and reinvent the business. Arrangements might be made with the creditors that you may not have thought were possible.

 

A DOCA is a binding arrangement between a debtor company facing the prospect of liquidation, and its creditors. A DOCA is agreed to after the company enters voluntary administration. The DOCA will provide direction in relation to how the company’s affairs will be dealt with, to assist the company ultimately surviving the liquidation process.

 

The arrangement will set out exactly how the company’s assets will be managed, in addition to the extent that the company will be released from its liabilities. It is typically in the interest of both the debtor company and the creditor(s) to come to a commercial agreement such as a DOCA, which will assist both the debtor company surviving, and the creditor(s) recovering more than what they might have otherwise.

Voidable Transactions & Unfair Preference Claims

A voidable transaction is deemed to have occurred when a transfer of assets to a third party has been made (related or unrelated), when the company was insolvent, or the transaction was detrimental to the company.

 

Voidable transactions can occur both in personal and corporate insolvency. However, when a company goes into liquidation, the liquidator will be able to claim back particular transactions that were made in the period prior to liquidation.

 

Unfair preference payments are the most common voidable transactions in corporate insolvency. This will have been deemed to have occurred when the debtor company makes payment to a creditor for monies owed, in circumstances where the creditor knew, or ought to have known, that the debtor company was insolvent. In contrast, in personal insolvency, the most common voidable transaction is a transfer to defeat creditors. This is when the person who is, or thinks they may become bankrupt, transfers an asset(s) to a third party to prevent that asset from becoming part of the transferor’s estate to be distributed to creditors.

 

The purpose of voidable transactions is to ensure that all creditors of the debtor company are treated fairly in the insolvency process, by safeguarding all possible assets to be made available for distribution between creditors.

 

If you have received a notice from a liquidator requiring repayment of a voidable transaction, our Insolvency Lawyers can assist your company in defending the claim.

Default Judgment & Setting Aside Applications

It is critical that you adhere to the time frames afforded in the Court Notice served. Failure to file certain documents, such as a ‘Notice of Intention to Defend’ and ‘Defence’, can result in the Court awarding a default judgment against you or the company.

 

In many circumstances, a default judgment can be set aside to give a defendant the opportunity to be heard.

 

Before the temporary changes were implemented in response to the COVID-19 pandemic, the minimum amount of debt that could trigger a bankruptcy was $5,000. However, the Government has amended the bankruptcy regulations to adjust the threshold for petitioning bankruptcy to:

  • $10,000 or more;
  • The amount of time an individual has to respond to a bankruptcy notice is 21 days, reduced from six months; and
  • Temporary debt protection allows for 21 days’ relief from creditors, instead of six (6) months.

 

A default judgment can be very damaging to an individual or a business, because it may be listed as a default on their credit rating.

 

If someone has obtained default judgment against you, you can still apply to the Court to have the judgment set aside. In most circumstances, the Court will require evidence in support of an application to set aside judgment, such as a satisfactory explanation as to why no defence was filed, and details of the defence to the claim.

 

The Courts have the discretion to set aside a default judgment if warranted by the circumstances, such as where the defendant has a genuine defence to a claim but did not file it within 28 days, or if the judgment is ‘irregular’.

 

However, if you are unable to avoid a default judgment, then you must file an application to set aside the default judgement. If the application is successful, the default judgment no longer exists, and cannot be enforceable.

What Next?

We are focused on providing strategic advice to assist liquidators in collecting, protecting, and realising assets, in addition to investigating and reporting to creditors about the company’s affairs, including preference payments, uncommercial transactions and possible claims against the company’s officers.

 

We work closely with our clients, their accountants and financial advisors to achieve the best possible results for them.

 

Whatever your insolvency issues are, whether personal or corporate related, our experienced team of Insolvency Lawyers are ready to assist.

 

Contact us today on (03) 8376 6209 or fill out the enquiry form on this page and one of our Insolvency Lawyers experienced in this complex area of law will contact you promptly.

Frequently Asked Questions

A creditor is someone who is owed money by the company, because (for example) they have provided goods or services, or made loans to the company. There are generally two types of creditors:

  • A secured creditor is someone who has a 'charge', such as a mortgage, over some or all of the company's assets, to secure a debt owed by the company (i.e. a bank in relation to a mortgage);
  • An unsecured creditor is someone who does not have a charge over the company's assets (i.e. a business that has provided either goods or services to a company).

You are a creditor if the company owes you money. You may be owed money because you:

  • Supplied goods or services to the company;
  • Made loans to the company;
  • Paid for goods or services that you have not received; or
  • Are an employee and are owed money for unpaid wages.

Three years from the ‘relation-back day’, which is either the day of first appointment as administrator, liquidator, or first filing of winding-up proceedings. Otherwise, when the company was insolvent, during the 12 months ending on the ‘relation-back day’.

In relation to personal insolvency, a bankruptcy trustee generally has six (6) years from the first act of bankruptcy to commence proceedings under the Bankruptcy Act 1966.

 

Whether to choose bankruptcy requires a close consideration of your personal circumstances.

Generally, however, bankruptcy protects creditors’ interests by having an independent Bankruptcy Trustee control and investigate the bankrupt’s affairs, and collect and distribute the bankrupt’s assets.

 

 

A person may become bankrupt in one of two ways:

  1. Self-initiated debtor’s petition - by filing a ‘debtor’s petition’ and a Statement of Affairs with the Official Receiver; or
  2. Creditor-initiated creditor’s petition – by a creditor filing a ‘creditor’s petition’.

Yes, because a person is legally deemed insolvent if they are unable to pay their debts when they fall due. A debtor may own sufficient assets to cover their debts, however, they may not be able to liquidate them to repay the debts, therefore they will be deemed to be bankrupted.

A person is an ‘undischarged bankrupt’ from the date of bankruptcy until they are either discharged or their bankruptcy is annulled. During this period a bankrupt individual:

  • Cannot act as a company officer;
  • Cannot trade under a registered business name without advising people that they are bankrupt
  • Must make all of their divisible assets available to the trustee;
  • Cannot incur credit without disclosing to the lender they are bankrupt; and
  • Must handover their passport and obtain permission to travel overseas.

Bankruptcy commonly ends with the bankrupt individual automatically being discharged from bankruptcy within three (3) years after their ‘Statement of Affairs’ is filed with the Australian Financial Security Authority, which will end the legal process.

Typically yes, your bankruptcy can be annulled, which reverses the bankruptcy, as if it never happened.

There are three ways of annulling a bankruptcy:

  1. The trustee obtains sufficient monies from you to pay all of the estate’s debts and costs;
  2. A section 73 proposal is accepted by the bankrupt’s creditors; or
  3. you convince the Court the bankruptcy should never have occurred.

 

We make things easy, efficient and worry-free. Talk to us today.