What is insolvency?
Any debtor; being any person, business, company or other corporate entity, having incurred a debt or debts; that is not able to pay their debts when they fall due for payment, is said to be “insolvent” — regardless of any assets or financial prospects that may be held. “Solvency” on the other hand, or being “solvent”, is the opposite and obviously preferable position, where any accrued debts can be paid in full and on time.
The insolvency of a company is likely to bring about a range of consequences, by way of Corporations Law, that can potentially threaten not just the company and its continuing existence, but also the company directors and their personal assets. In addition to the information offered on this page, use the drop-down menu above or the following links to access answers to questions regarding the following related, important topics:
- Voluntary Administration
- Director Penalty Notice
- Deed of Company Arrangement
- Personal Guarantees
- Insolvent Trading
Being personally insolvent can lead to you being declared “bankrupt”. Bankruptcy is an official and public financial status that occurs when a person is insolvent and either declares bankruptcy, or else a creditor or creditors “bankrupts” them through the Courts. Bankruptcy is a legal process where a Trustee in Bankruptcy is appointed to administer the bankrupt’s affairs, in order to provide for a fair distribution of the person’s assets to their creditors. In Australia, the term “bankrupt” refers to a person, as distinct from a company and other entity. Use the drop-down menu above or the following links to access answers to questions regarding bankruptcy:
Alternatives to Bankruptcy
Although bankruptcy is a legitimate way for a person to solve his or her debt problems, and is the correct way for a creditor or creditors to take action against someone for unpaid debts, you need to be aware that the consequences of bankruptcy are both long term and serious, and where possible you should try to avoid entering into it. There are legitimate alternatives to bankruptcy, which TAP Turnaround Professionals can help you arrange and negotiate. For example, both your creditor/s and you are likely to benefit from you entering into a Personal Insolvency Agreement, where you make an acceptable repayment arrangement with your creditors without being declared bankrupt. Use the drop-down menu above or the following links to access answers to questions regarding legitimate alternatives to bankruptcy:
Preparing for insolvency
Whether you’re a company or an individual, before declaring insolvency or entering into liquidation, administration or bankruptcy, it makes sense to organise your tasks and schedule to be prepared for the next step and as far as as possible safeguard your interests. The work mainly involves collecting all the information you need to help to design a strategy that will best suit and protect you and your family. TAP Turnaround professionals will support and assist you with this process, aiming first to save your business or situation, or at the very least make sure you are positioned to best protect your remaining interests. See also the Section — Pre-insolvency
What to do about insolvency
If you know or suspect that you or your business is insolvent it is important for your and your family’s sake to act without delay. If you are a director of a company that is continuing to trade or obtain credit while insolvent — see Insolvent Trading — you personally as well as your assets may be at serious risk. TAP Turnaround Professionals are dedicated to supporting and helping business owners and others who are experiencing financial difficulty. Given enough time, it may be still be possible to save not only your financial reputation, but also your business.
Our service to you begins with a free, discreet, no-obligations discussion about how TAP can help you with your financial circumstances. Contact us any time on 1300 518 070