In Australia, corporate insolvency differs significantly from personal insolvency. For companies registered with the Australian Securities and Investments Commission (ASIC), the ultimate outcome of insolvency is typically liquidation. In contrast, for individuals, the final stage is often bankruptcy, overseen by the Australian Financial Security Authority (AFSA).
When an Australian company faces insolvency or nears this state, several parties may become involved. An administrator, often appointed under Part 5.3A of the Corporations Act 2001, a receiver (potentially appointed by secured creditors), or a liquidator may step in. These appointments usually occur when the company either struggles to meet its financial obligations to creditors on time, or when its total liabilities surpass the value of its assets, as defined in Section 95A of the Corporations Act.
Bankruptcy, governed by the Bankruptcy Act 1966, is a legal procedure that individuals or partnerships (but not companies) in Australia may pursue to address their insolvency. It’s important to note that not every insolvent person will necessarily file for bankruptcy with the Official Receiver. In many cases, alternative solutions exist. For instance, individuals might negotiate informal arrangements with creditors, enter into debt agreements under Part IX of the Bankruptcy Act, or propose Personal Insolvency Agreements under Part X. These options, facilitated by registered trustees, often allow for debt resolution without resorting to full bankruptcy proceedings.