When companies become insolvent in Australia, it becomes public information. This comes in the form of an insolvency notice. Creditors, shareholders and the general public all have access to this information. In most cases, it is a legal requirement under the Corporations Act 2001 (Cth) for these notices to be published. In this article, we’ll explain what ASIC’s insolvency notices are, and what circumstances require publication.
What is an insolvency notice?
Insolvency notices forms part of ASIC’s published notices board. These notify the public about a business’s financial instability or other arrangements for the company to cease trading. It informs creditors of relevant contact details and upcoming meetings. Therefore, they must always contain relevant contact details for the insolvency members working on the case. Notices fall into the categories of external administration or other public notices. These listings generally cover:
- Notices relating to a company’s external administration (voluntary and also Court-ordered)
- Winding up applications filed in Court
- Members voluntary winding up (for a solvent company)
- Some notices relating to schemes of arrangements under Part 5.1 of the Corporations Act (insolvency related)
- Voluntary or ASIC proposals to deregister a company
- Some notices relating to schemes of arrangements under Part 5.1 of the Corporations Act (non-insolvency related)
- ASIC’s intention to wind up a company under section 489EA of the Corporations Act
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Get startedInsolvency
An insolvent company is one that is unable to pay its debts when they are due. Directors should take action straight away when a company becomes insolvent, as trading whilst insolvent is illegal under the Corporations Act 2001 (Cth). Insolvency leads to administration, receivership, liquidation and winding up.
Administration
Voluntary administration is a process where a company that is facing financial problems appoints someone externally to manage the company’s finances. This can result in a number of outcomes including restructuring the company, finding new owners and also winding up the company if it can’t be saved. The role of the voluntary administrator is to investigate the company’s affairs. Some responsibilities include to report to creditors and further, to make recommendations. They can recommend whether the company should enter into a deed of company arrangement, go into liquidation, or return to the control of directors.
Receivership
Secured creditors often appoint receivers to recover outstanding debts. The receiver will sell secured assets to repay the creditors – in many cases a bank. Once the debt is resolved, the company may go back to trading.
Winding up
Winding up a company simply means making arrangements for the company to close. This can be voluntary or ordered by a Court. This normally occurs when a company fails to comply with a statutory demand. A key part of the process is liquidating the company.
Liquidation
Liquidation is the final stage for companies in financial strife. This involves selling all of the company’s assets to repay creditors. When a company goes into liquidation, this normally means that it cannot be saved. Further, liquidators can be appointed voluntarily or by a Court.
Conclusion
Insolvency notices allow members of the public and interested parties to see the status of companies in financial trouble. Companies which are required to lodge a notice but fail to do so can face penalties by ASIC. If your company is insolvent, or you want further advice about managing your company’s finances, it may be worth getting in touch with a commercial lawyer.
