Corporate and Personal Insolvencies Links What is a Court Liquidation? System On an application made by a creditor, director or some other interested party, to either the Supreme or Federal Court, an Official Liquidator can be placed in charge of a company and its assets and business for the purpose of winding it up. The Official Liquidator realises the company’s assets and distributes the monies collected amongst creditors and if appropriate, shareholders. The process from time of application to appointment of Liquidator is usually around four weeks. What is a Provisional Liquidation? System On an application made by a creditor, director or some other interested party, to either the Supreme or Federal Court, an Official Liquidator can be placed in charge of a company and its assets and business for the purpose of maintaining and protecting the assets until the Court formally considers any winding up application. Such an order is generally made by the Court in circumstances where there is a real or perceived concern that either: assets of the company may be lost, removed or otherwise dissipated, or the company’s business may be adversely affected by some pending event or the value of the business in some way reduced without the control and protection of the Provisional Liquidator. What is a Members Voluntary Liquidation? System A company which is solvent, but has come to the end of its useful purpose, is liquidated by shareholder resolution which results in the appointment of a Liquidator and the ultimate realisation and distribution of company assets. No particular licence is required to act as a Liquidator in these circumstances. The link attached here provides, free of charge, the forms and checklist for you to undertake such a Liquidation. What is a Receivership? System A secured creditor (ie one with either a fixed and or floating charge) can appoint an Official or Registered Liquidator to take control of assets subject to the charge and to realise them for the secured creditor’s benefit; but regard must be had to the Receiver’s obligations to other creditors, the company and its members. The Receiver is commonly appointed as a Receiver and Manager so as to enable business activity to continue. When the Receiver has collected all available monies subject to the charge, the remaining assets (if any) and company are returned to the control of the directors – but quite commonly, in the interim, a Liquidator will have been appointed and control will then be handed to the Liquidator. What is a Voluntary Administration? System A company which is insolvent or is likely to become insolvent at some future date can obtain protection from creditor action by the appointment of a Registered Liquidator to act as Administrator of it. The Administrator, while taking control of the company and where appropriate continuing its operation, must investigate the company’s affairs and provide a report to creditors making a recommendation as to its future. At a meeting of creditors, usually called 28 days after the Administrator’s appointment, creditors will vote to decide whether to accept or reject any proposal that may be put forward as to how the company’s affairs are dealt with into the future. The Administrator is usually appointed by the Directors but can also be appointed by a Secured Creditor with a charge over all or a substantial portion of the company’s assets. What is a Bankruptcy? System This applies to individuals who are insolvent. An individual can declare himself bankrupt; or alternatively a creditor can make application to the Federal Court for an order declaring an individual bankrupt (a sequestration order). Although some assets are protected from bankruptcy (eg necessary household furniture and effects, some tools of trade and a restricted interest in a motor vehicle) all other assets are passed to the Bankruptcy Trustee for realisation and distribution amongst creditors. Income earned by a bankrupt during the bankruptcy period (usually 3 years) is shared with creditors once it exceeds threshold levels. A Bankruptcy Trustee has wide powers of investigation and the ability to recover assets disposed of prior to bankruptcy in circumstances where, for example, normal commerciality has been disregarded. What is a Part IX Debt Agreement? System Where a person has limited debts, limited assets and limited income a bargain can be reached with creditors to pay debts in part (as full satisfaction of monies owed) or in full but over, say, an extended period. The bargaining process is regulated and is conducted through a postal ballot under the supervision and control of the government agency, Insolvency and Trustee Service Australia. The process is designed to be relatively quick and inexpensive. What is a Part X Arrangement and Composition System with Creditors? To avoid bankruptcy, a debtor can appoint a controlling trustee to take charge of his assets, conduct an investigation and through a formal meeting process put a proposal to creditors as to how debts will be paid – either in part or in full without the necessity of bankruptcy. The bargain able to be reached with creditors is very flexible and commonly involves monies being available to creditors (eg from a third party), which they would otherwise not have access to. A Part IX or X is for an individual, the equivalent of a Voluntary Administration for a company. What is a Section 73 Composition Bankruptcy Act System 1966? After bankruptcy, a bankrupt may put a proposal to creditors to make funds available for their benefit which they otherwise would not receive (eg monies from a third party). If the proposal is accepted the bankruptcy is annulled. For further information, contact SV Partners directly to discuss the specific details of your client’s individual situation. The links above also give more detailed information about matters generally.
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