Frequently Asked Questions

An unsecured creditor has no security interest over the assets of a company.

A debtor is a person, business, company or entity that owes money.

There are a few steps involved to conduct a Small Business Restructuring Plan. These will be explained in more detail throughout your consultation. The first stage is ensuring that the business meets the necessary eligibility requirements. The directors of the company must decide that the company is insolvent or likely to become insolvent. A Restructuring Practitioner is then appointed, along with the agreed remuneration amount that will be fixed for the proposal period. The Restructuring Practitioner advises the company about the restructure and assists in preparing a restructuring plan. 

The restructuring plan is circulated to creditors for their vote and if approved, the company can continue to trade. The Restructuring Practitioner administers the implementation of the plan, giving breathing space from creditors whilst strategies are in place to pay debts. Once the restructuring plan terms are satisfied, the plan is then terminated. 

The planning development period occurs within 20 business days commencing on the day the restructuring begins. The timing may be extended by no more than 10 business days, subject to conditions.

The objective of the plan is to fulfill the obligations of all parties associated with the plan and all admissible debts have been dealt with. The outcome is for the business to continue trading without debts that were causing its insolvency.  

1. The business is unable to pay its debts when they fall due (insolvent or likely to become insolvent)
2. The business must be operated by a company
3. Total liabilities must be less than $1 million to creditors (excluding employees entitlements)
4. All employee entitlements including superannuation are up to date
5. All tax lodgements are up to date
6. The business must not have previously undergone a Small Business Restructure or a Simplified Liquidation process in the past 7 years
7. Both the current and former company directors acting within the past 12 months must not have been a director of a company that has utilised a Small Business Restructuring Plan or a Simplified Liquidation process in the past 7 years

There are options available for businesses that are suffering with debts. Our friendly team will go through these options with you in a free consultation. It is important to seek financial advice as soon as possible if you are facing unmanageable debts.

A Restructuring Practitioner is a qualified professional that acts as the company’s agent during a Small Business Restructuring Plan. A person that is registered with the Australian Securities and Investments Commission as a ‘Registered Liquidator’ is authorised to act as a Restructuring Practitioner. It is the responsibility of the Restructuring Practitioner to provide the necessary advice about the company’s restructuring and assist with developing the plan.

The Deed of Company Arrangement intends to increase the company’s chances of survival. It also maximises the returns to creditors in comparison to placing the company into liquidation. The Arrangement’s purpose is to benefit all stakeholders by paying off part or all debts over a period of time.

It is typically proposed by the company director/s with consultation of the Liquidator. The Liquidator (Deed Administrator) administers the process.

Yes. If the Deed of Company Arrangement is not signed by the company within 15 business days following a second creditors’ meeting. The company will automatically enter liquidation. Alternatively, if creditors vote that the company should be liquidated under the circumstances that there is a breach of the Deed or if the terms cannot be fulfilled. A Deed of Company Arrangement can also be terminated if an application is made to the Court and the Court is satisfied that there are grounds to terminate.

If you are a director of a company and you are unable to pay your debts when they are due, you are insolvent trading. It is important to seek immediate professional advice if you are insolvent trading.

Employees are terminated when a company has entered the liquidation process. As the company is deemed ‘insolvent’, it means it can no longer pay its debts and its financial obligations to creditors.

Employees are treated in priority over unsecured creditors when it comes to any debts that can be recovered. If there are recoverable funds after liquidator’s fees and expenses are paid, employees have rights to be paid their entitlements. Their entitlements are categorised in a priority order; outstanding wages and superannuation, outstanding leave entitlements, retrenchment or redundancy pay.

After the appointment of a Liquidator, the Directors of a company have no director powers. They must assist the Liquidator in disclosing all properties, assets, books and records and any other records regarding the company’s affairs. A director must provide full disclosure of the company’s affairs to the Liquidator.

After the Liquidator has realised (accounted for and sold) the company’s assets and distributed proceeds back to interested parties. The Liquidator will report back to the Australian Securities and Investments Commission (ASIC). The company will then be deregistered three months after the Liquidator has lodged their final receipts and payments to ASIC.

A Members’ Voluntary Liquidation occurs when directors of a solvent company intend to wind up the company and its affairs.

No. A Members’ Voluntary Liquidation is only applicable for solvent companies. When company directors intend to wind up an insolvent company, this is known as a Creditors Voluntary Liquidation.

Yes. The company directors must sign a declaration that the company is solvent. This declaration confirms that the company is able to pay off its debts in full within 12 months of the commencement of the Members’ Voluntary Liquidation process.

If you are unsure whether your company is solvent, it is likely you need a professional (such as Insolvency Options) to make the assessment. It is advised that you call our team to discuss your company’s financial situation. 

Once the declaration is signed (and lodged with ASIC), the company members must pass a special resolution to wind up the company. The company must appoint a liquidator to wind up the company and its affairs from when the special resolution is passed. 

After the liquidator has finalised the winding up process, the company will be deregistered three months after the final forms have been lodged.

A garnishee notice is issued by the ATO as a form of tax debt recovery action. It is a notice that can be provided to a person or business that currently holds or will hold money for you. This garnishee notice legally requires them to pay the ATO directly instead of paying any money to you. An example of this in a company’s situation is if the ATO issues a garnishee notice to your financial institution. That financial institution must legally pay the ATO for the stated nominated amount (by the ATO) to reduce your tax debt.

If you do not own a business and you are acting as an individual with tax debts, you may also face serious consequences. It is important that you communicate your situation to the ATO immediately.

Illegal Phoenix Activity occurs when a company is liquidated (or wound up) to avoid paying its debts, while a new company is created to continue the same operations. Illegal phoenix activity is treated as a serious offense under the Corporations Act 2001 and there are harsh penalties and legal consequences of this conduct. For more information on Illegal Phoenix Activity, visit the Australian Securities and Investments Commission.

Firstly, interest will be added to any amounts that are not paid by the due date. At this time you will also receive communication from the Australian Taxation Office (ATO) notifying you of your unpaid tax. If these attempts are ignored, further actions are likely to be taken including using any credits to offset debts or a bankruptcy notice. A bankruptcy notice issued by the ATO allows the individual 21 days to pay the debt in full or enter a payment plan with the ATO. If the bankruptcy notice is ignored, the ATO will take further action and apply to the Federal Court to bankrupt the individual.

Pending on your circumstances, the amount of debts you owe and what is negotiated and discussed between you and your Trustee (the individual that administers the Agreement).

No. A Personal Insolvency Agreement is a formal act of insolvency and legally requires a Trustee to administer the process.

A Trustee is an individual that administers a Personal Insolvency Agreement or Bankruptcy. They are qualified and registered with the Australian Financial Security Authority (AFSA).

With all types of insolvency options, it is important that you consult a professional to understand the consequences. By entering into a Personal Insolvency Agreement, there may be impacts to your employment or business, your credit file and your name will be listed permanently on the National Personal Insolvency Index (NPII). More information on consequences of Personal Insolvency Agreements can be found on the Australian Financial Security Authority (AFSA). We recommend you speak to our team in a confidential consultation to understand the consequences of a Personal Insolvency Agreement (or any type of insolvency option).

As Bankruptcy is a formal process, it is best to speak to our professional team that will refer you to a qualified Trustee to handle your bankruptcy. Declaring bankruptcy is part of the formal administration process and resides with the Trustee as part of their obligations to the Bankrupt and creditors.

As each individual’s situation is different, Bankruptcy may or may not be the best course of action for you. Our team of professionals will assess your situation and discuss your options to see whether Bankruptcy is the best solution.

During bankruptcy, your assets may be sold to pay off your creditors. The types of assets that are subject to being sold pend on your situation and their value or their purpose. An example of this is your vehicle used for work. You may be able to keep your vehicle if it is valued under a certain threshold amount. Other assets that may be impacted (not limited to) are your house, other properties and cash.

Yes, there are two requirements you need to satisfy before you can declare bankruptcy. The first of the two is that you must not be able to pay your debts when they fall due (you must be insolvent). The second requirement is that you are present in Australia or have a residential or business connection with Australia. These are the only two requirements of entering Bankruptcy.

A Trustee’s responsibility is to inform your creditors of your bankruptcy. The Trustee acts on your behalf and communicates with your creditors. For most people in stressful situations this can be a relief. After your Trustee evaluates your financial situation, your (applicable) assets are sold in order to pay creditors part or all of your debts.

Most debts are unsecured, meaning there is no tie to a security interest (such as a house ie. mortgage). Examples of unsecured debts include credit cards, unsecured loans, electricity and internet bills. In most cases, bankruptcy will free you from these unsecured debts. 

If you are an individual and have tax debts, bankruptcy may or may not clear you of these debts. For example, debts that are not cleared as a result of bankruptcy are HECS or HELP debts (Government education loans) or child support payments. Call our friendly team to discuss your debts and if they are covered in bankruptcy.

Bankruptcy typically lasts for 3 years and 1 day.

Your Trustee will communicate with you during your bankruptcy and at the time you are released from bankruptcy. After your bankruptcy period you will be discharged. It is important to know that the bankruptcy period can be extended pending on the bankrupt’s conduct. This will be communicated to you if that becomes the case.