Corporate Insolvency in Australia
Regulated by the Corporations Act 2001 (Cth). The different types of insolvency administrations available to corporate debtors under the Corporations Act are:
Court Winding-up (or liquidation)
Provisional Liquidation
Voluntary Winding-up (or liquidation)
Voluntary Administration
Deed of Company Arrangement
Scheme of Arrangement.
Controllership, which includes where a receiver or receiver and manager is appointed
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Court Liquidation
Occurs when and if the Court exercises it discretion to order the winding up of the company, following consideration of an application filed with it. The applicant is usually a creditor, although others including the company can apply. A Court Liquidation provides for the winding up of a company’s affairs under the control of an independent official liquidator and the orderly distribution of available monies amongst creditors. The liquidator will also carry out investigations of the company’s demise.
Provisional Liquidator
Can be appointed any time after the application for the winding up of a company is lodged. The purpose of appointing a provisional liquidator is to exercise interim control over the assets and affairs of the company until the Court hears the winding up application and decides whether to appoint a liquidator or not. The appointment of a provisional liquidator may be requested if it is felt that the assets of the company are at risk and it is in the interest of creditors that the assets are protected, or for commercial reasons (such as directors’ potential exposure to insolvent trading).
Voluntary Liquidation
A process formally initiated by the debtor company to wind-up its affairs and cease business, so that assets may be controlled and realised and the proceeds distributed in accordance with the Corporations Act. The company is placed into Voluntary Liquidation by a resolution of its members. There are Members’ Voluntary Liquidations and Creditors’ Voluntary Liquidations.
For a company to enter into a Members’ Voluntary Liquidation, the company must actually be solvent. If the company is insolvent, it will be placed into Creditors’ Voluntary Liquidation upon the passing of the resolution by members. A company can also be placed into Creditors’ Voluntary Liquidation by creditors so resolving at a meeting of creditors held during a Voluntary Administration or Deed of Company Arrangement.
Voluntary Administration
A formal moratorium type administration. A proposal for the company’s future will be put to creditors, who may decide to accept a Deed of Company Arrangement or to liquidate the company. In the meantime, a unique stay on creditor action extends, with limited exceptions, to even secured creditors, landlords and other owners of property used by the company.
Deed of Company Arrangement
A procedure permitting a company to make a compromise or arrangement binding on all its creditors. It will usually compromise creditor’ rights, but with the aim of producing a situation ultimately beneficial to creditors when compared with liquidation. The Corporations Act provides the procedures for effecting such a compromise, and enables the arrangement to be made binding on all creditors if assented to by a simple majority at a meeting of creditors. If the company’s undertakings under the Deed are not carried out, the Deed will fail and the company will usually be wound up by means of a creditors’ voluntary winding up.
A controller of property of a corporation is a Receiver or Receiver and Manager or anyone else in possession or control of corporate property for the purpose of enforcing a charge. The appointment is usually made by a secured creditor, or in some cases by the Court. The controller has the power to realise company assets for the benefit of the appointor. While ordinary creditors are not prevented from pursuing normal remedies (eg forcing the company into liquidation), unless the controller has been improperly appointed, the assets which he or she is entitled to realise will not be generally available to ordinary creditors until the appointor is repaid.
Scheme of Arrangement
Similar objectives to a Deed of Company Arrangement, but it is more complex and may be used by both solvent and insolvent companies. It is rarely used by insolvent companies now, having been largely replaced by Deeds of Company Arrangement.
Corporate administrations are not necessarily exclusive, eg a receivership and a liquidation may co-exist or a receivership and a voluntary administration.
Our People
Peter Lucas
Peter Lucas has been a Chartered Accountant for over 30 years and an official liquidator since 1998.
He began his professional career in Sydney before moving to Queensland in 1989. Since that time he has worked in a variety of firms in Brisbane including on of the “Big 4” Accounting Firms and also smaller boutique firms.
During this period Peter has specialised in the Insolvency, Reconstruction, and Turnaround Management areas of the accounting profession. He has been exposed to a wide range of industries and has worked with individuals, small businesses and also large national companies with turnover up to $100M per annum.
His experience in the development and implementation of strategic, financial and operational reconstructions, the sale of businesses and formal insolvency management has strengthened his reputation and led him into his own practice, which has continued to grow since 1999.
Fatima Deen
Fatima has 17 years of experience, having commenced in the Insolvency industry in 2001.
She joined P A Lucas & Co in 2012 after experience at other boutique insolvency firms. Fatima’s experience covers a wide range of both Personal and Corporate appointments.
Having commenced her career in law, Fatima has a strong technical knowledge of insolvency and focuses on all aspects of corporate insolvencies including administrations, investigations and voidable transaction recoveries. Fatima also manages Personal insolvency appointments.
Fatima strives to efficiently provide positive results for all stakeholders.
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