Information for Directors & Shareholders

 

Glossary of Insolvency Terms

This is a brief explanation of some of the terms you may come across in company insolvency proceedings. Please note that this glossary is for general guidance only. Many of the terms have a specific technical meaning in certain contexts that may not be covered
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Your Company and the Law

A director or secretary of a small company must follow the requirements set out in the Corporations Act 2001 (Corporations Act)
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Insolvency Guide for Directors
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Insolvency Guide for Shareholders
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Books & Records a Company Should Keep

The Corporations Act in s286 (1) states that a company must keep written financial records that:
•    Correctly record and explain its transactions and financial position and performance; and
•    Would enable true and fair financial statements to be prepared and audited
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Directors Duty to Prevent Insolvent Trading

A director has a positive duty to prevent insolvent trading under s588G of the Corporations Act 2001 (Corporations Act). The duty applies to directors, both those who are appointed to the position and any alternate director they appoint and who is acting in that capacity.  The duty also applies to persons who are not formally or validly appointed as directors, but who act in the position of a director, or in accordance with whose instructions or wishes the company’s directors are accustomed to act
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Voluntarily Deregistration of a Company

A company remains registered even after it ceases trading. While registered it is still subject to the legal requirements of a registered company, including payment of the annual review fee. If you have no further use for your company and it is not in financial difficulty or insolvent, you may wish to close it down (deregister). A company ceases to exist on deregistration.
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Winding up a Solvent Company

The members of a solvent company may wind-up the company under s491 of the Corporations Act 2001 (the Corporations Act)
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How can a Creditor Enforce a Court Judgment?

If you have breached a credit contract and are in debt, the creditor to whom you owe money can get a court judgment against you
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How do I Deal with Debt Collectors?

To find out where and why you can be contacted about a debt and what sort of behaviour by debt collectors is unacceptable
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Independence of External Administrators

When a company enters into voluntary administration, a deed of company arrangement or liquidation, it is important that the person put in charge (the ‘external administrator’) is independent of the company and its directors, and acts in the interests of creditors as a whole
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Bankruptcy and Personal Insolvency Agreements

Bankrupts and persons under a personal insolvency agreement cannot generally manage a corporation and there are severe penalties for doing so.
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FAQs

Is my company in financial difficulty?

What do I do if my company is in financial difficulty?

What if my company is insolvent?

What are my duties as a director?

What are the consequences of insolvent trading?

How does an external administration affect me as a director?

What is my role in assisting an external administrator?




Greg Shilton

Insolvency and Liquidation Specialist

 

Confidential

Practical

Objective

 

03 9553 2062

admin@gregshilton.com.au