Corporate Insolvency

At Khoury Scott and Associates, we focus on delivering high quality legal advice, assistance and representation throughout the entire lifecycle of a business – this includes restructuring, dealing with financial difficulties and, if otherwise unavoidable, insolvency.

When a company is unable to pay its debts as and when they fall due, it may be deemed insolvent.  The moment this happens, directors ought to be aware of their obligations under the Corporations Act 2001 (Cth), most importantly, the director’s positive duty to prevent the company from trading whilst insolvent.

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Information for Directors

At Khoury Scott and Associates, we focus on delivering high quality legal advice, assistance and representation throughout the entire lifecycle of a business – this includes restructuring, dealing with financial difficulties and, if otherwise unavoidable, insolvency.

When a company is unable to pay its debts as and when they fall due, it may be deemed insolvent.  The moment this happens, directors ought to be aware of their obligations under the Corporations Act 2001 (Cth), most importantly, the director’s positive duty to prevent the company from trading whilst insolvent. 

If a director fails to act swiftly and effectively to return the company to a solvent state, then the director may be held personally liable for both civil and criminal penalties for breaches of their director duties. 

Our team advise directors through these tough times.  With experience handling largescale insolvency matters our lawyers are able to present options to directors which can assist in the efficient handling of prospective, or real, insolvency issues within your business.  As always, the best advice is to get advice and sooner rather than later as the options available will diminish with the passage of time.

So what options are typically available?

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Restructuring

If a company is, or is likely to become, insolvent then it might be the case that the business ought to undergo a restructure.  Directors ought to seek advice from advisors, such as lawyers, when restructuring to avoid running into any potential breaches of director duties and to ensure the proposed restructure is lawful.

Working alongside your accountant as well as other industry experts, our team can assist in assessing whether the business ought to be restructures and prepare a plan on how best to structure the business and assist throughout the entire process.

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Voluntary Administration

It might be the case that the business cannot be restructured, or, cannot be restructured without a formal appointment. If this is the case, our team are able to assist in assessing which appointment is most appropriate. One such option is Voluntary Administration.

Voluntary Administration is the name afforded to a formal process where an insolvent company appoints an independent third party (Administrator) to step into the shoes of the director to assess the options and generate solutions and outcomes for creditors. It is important to note that Voluntary Administration is NOT liquidation. The objective of Voluntary Administration is to save the company so that it may continue its operations, whereas liquidation is the process of finalising the company’s affairs.

While daunting, Voluntary Administration has many positives, which include (among other things):

  • Providing creditors with an independent third-party assessment and opinion on the company and its business;
  • Creating the opportunity to continue the business (either through the company or another);
  • Allowing for negotiation and compromise to be reached between the company and its creditors; and
  • Serving as an alternative to liquidation.

Our Insolvency lawyers are able to assist directors navigate the Voluntary Administration process by facilitating the appointment, negotiating the continued trading of the business throughout the Administration process, liaising with the Administrator to assess options preparing Deeds of Company Arrangement and much more.

Liquidation

Sometimes, there is no alternative but to liquidate the company.  Liquidation is the process of winding up and finalising the company’s affairs in accordance with the Corporations Act 2001 (Cth).  A company can enter liquidation either voluntarily or involuntarily, by a creditor bringing an application to wind up the company in either the Supreme or Federal Court.

Our insolvency lawyers act on both sides of liquidation, for directors as well as for creditors.  It is this unique knowledge of the intricacies of what is needed to make and defend wind up applications that allow our lawyers to best advise our clients.

When looking to save your business, liquidation is often not high on your list of options; however, it can sometimes serve as the most appropriate option when working alongside a restructure.

Having an experienced insolvency lawyer on your side to guide you through the process, advise on the options and potential director exposure is key as a liquidation can impact directors personally and attracts serious scrutiny.

Get a qualified insolvency lawyer on your side today by claiming your free consultation.

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