Inside Insolvency: Corporate Insolvency
From macroeconomic conditions to legislative and policy amendments to the individual circumstances of each company, the factors driving corporate insolvency are diverse and changeable.
If a creditor is owed money by a company, there are many ways they can seek to recover it. Directors and companies should be aware of their rights and obligations in the event that debt collection processes are in full swing and the company is exposed to legal action and enforcement.
Taking an interest in the liquidation of a company that owes you money may stand you in good stead to secure a better financial return.
In creditors voluntary liquidation a meeting of creditors is required to be convened within 11 days of the appointment of a liquidator being made by the Company’s members.
Taxpayers and company directors are aware that the Australian Taxation Office (ATO) holds a special suite of powers beyond the usual debt recovery strategies that set them above the usual creditor however those powers have expanded in recent years.
When a Director is contemplating putting their company into liquidation, one of their biggest fears is that their loyal and hardworking staff won’t be paid their entitlements.
When a company is experiencing a cash flow or liquidity crisis, it is important that its directors and officers consider the company’s ability to pay all of its debts as and when they become due, namely, whether the company is insolvent.
Often referred to as ”claw back provisions”, sections 588FA and 588FB of the Corporations Act 2001 (Cth) (Act) permit liquidators and trustees in bankruptcy to recover certain transactions made by the insolvent company within a specified period prior to the commencement of the liquidation or bankruptcy.
In a challenging economic climate, even the most sophisticated business can fall prey to volatile market conditions and cash flow pressures. A quick response to the signs of company turmoil is crucial turning the situation around.