Corporate Insolvency Advice2024-10-14T14:15:37+00:00

CORPORATE INSOLVENCY ADVICE

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Litigation Lawyers Sunshine Coast

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Corporate Insolvency Advice

Confronting the reality of insolvency can be a daunting experience, often stemming from unforeseen circumstances such as market downturns, operational challenges, or personal financial upheavals. The ripple effects of insolvency can extend beyond the balance sheet, impacting personal lives, employee livelihoods, and business reputations. In these turbulent times, seeking expert advice at the right time is essential in understanding the legal implications and exploring all available avenues.

At Axia Litigation Lawyers, we provide critical insight into your options when facing insolvency, ensuring you have the knowledge to make informed decisions that can preserve your financial stability. With our guidance, you may discover alternatives to insolvency, such as restructuring, informal arrangements with creditors, potentially helping you avoid insolvency altogether. However, if insolvency is unavoidable, we are here to support you through the process, helping you face it with confidence and achieve the best possible outcome.

Contact us: Monday to Friday : 9 am – 5 pm

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Strategic Restructuring

Restructuring for improved financial viability.

Creditor Negotiation

Negotiating terms to potentially reduce debt burdens.

Director Liability

Navigating director duties and mitigating personal risk.

Asset Protection

Lawful strategies to maximise and protect assets.

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how Axia Can Help Businesses When Facing Insolvency

Axia Litigation Lawyers offer comprehensive legal assistance to businesses confronting insolvency, utilising a multifaceted approach informed by our deep understanding of insolvency law and commercial litigation. Here is an outline of the services we offer:

Axia Litigation Lawyers offers comprehensive legal consultations to meticulously assess your financial situation, enabling us to develop a robust strategy tailored to your specific circumstances and objectives.

Our team provides expert advice on various insolvency pathways, including business restructuring, voluntary administration, or liquidation, ensuring you understand each option’s potential impact on your financial future.

We engage with creditors to negotiate debt settlements that may result in reduced obligations or more manageable repayment terms, helping you to avoid the full impact of insolvency.

Axia Litigation Lawyers acts as a mediator and negotiator between our clients and liquidators, ensuring efficient and transparent communication throughout the liquidation process. Additionally, we can negotiate on your behalf, addressing the terms of asset sales, distribution of proceeds, and resolving disputes that may arise.

Axia Litigation Lawyers provides vigorous representation in court, advocating on your behalf in all legal matters related to insolvency, from defending against winding-up applications to pursuing your claims.

We offer clear guidance to company directors on fulfilling their legal duties, including strategies to mitigate personal liability and navigate the complexities of insolvent trading laws.

Our legal team advises on the strategic realisation of assets to maximise returns for creditors, as well as on lawful measures to protect your assets during insolvency.

We draft and advise on the terms of Deeds of Company Arrangement for companies under voluntary administration, aiming to achieve practical solutions for the company and its creditors.

Our team assists in assessing and/or responding to statutory demands, which are formal requests for payment of a debt issued by creditors to companies. We prepare the necessary documentation to dispute or set aside the demand where appropriate.

We negotiate the terms of personal insolvency agreements and propose annulment strategies to provide individuals with alternatives to bankruptcy.

Axia Litigation Lawyers handles litigation related to insolvency, including defending directors in breach of duty cases, pursuing third-party debt recovery actions and providing representation in insolvency-related court proceedings for director and liquidators.

  • In Depth Legal Consultation

  • Strategic Insolvency Advice

  • Creditors Negotiations

  • Liaising & Negotiating With Liquidators

  • Court Representation

  • Guidance on Director’s Duties

  • Asset Realisation and Protection

  • DOCA Preparation and Advice

  • Statutory Demand Response

  • Personal Insolvency Negotiation

  • Insolvency Litigation

In-Depth Legal Consultation
Axia Litigation Lawyers offers comprehensive legal consultations to meticulously assess your financial situation, enabling us to develop a robust strategy tailored to your specific circumstances and objectives.
Strategic Insolvency Advice
Our team provides expert advice on various insolvency pathways, including business restructuring, voluntary administration, or liquidation, ensuring you understand each option's potential impact on your financial future.
Creditor Negotiations
We engage with creditors to negotiate debt settlements that may result in reduced obligations or more manageable repayment terms, helping you to avoid the full impact of insolvency.
Liaising & Negotiating with Liquidators
Axia Litigation Lawyers acts as a mediator and negotiator between our clients and liquidators, ensuring efficient and transparent communication throughout the liquidation process. Additionally, we can negotiate on your behalf, addressing the terms of asset sales, distribution of proceeds, and resolving disputes that may arise.
Courtroom Representation
Axia Litigation Lawyers provides vigorous representation in court, advocating on your behalf in all legal matters related to insolvency, from defending against winding-up applications to pursuing your claims.
Guidance on Director's Duties
We offer clear guidance to company directors on fulfilling their legal duties, including strategies to mitigate personal liability and navigate the complexities of insolvent trading laws.
Asset Realisation and Protection
Our legal team advises on the strategic realisation of assets to maximise returns for creditors, as well as on lawful measures to protect your assets during insolvency.
DOCA Preparation and Advice
We draft and advise on the terms of Deeds of Company Arrangement for companies under voluntary administration, aiming to achieve practical solutions for the company and its creditors.
Statutory Demand Assessment & Response
Our team assists in assessing and/or responding to statutory demands, which are formal requests for payment of a debt issued by creditors to companies. We prepare the necessary documentation to dispute or set aside the demand where appropriate.
Personal Insolvency Negotiation
We negotiate the terms of personal insolvency agreements and propose annulment strategies to provide individuals with alternatives to bankruptcy.
Insolvency Litigation
Axia Litigation Lawyers handles litigation related to insolvency, including defending directors in breach of duty cases, pursuing third-party debt recovery actions and providing representation in insolvency-related court proceedings for director and liquidators.

Over 75 Years of Combined Experience

Meet Our Expert Team

Axia Litigation Lawyers provide exceptional service and peace of mind for their clients. Based on the Sunshine Coast, Queensland, the Axia team services clients throughout Australia and abroad.

Adam Brown

Managing Director

Adam is the founder and Managing Director of Axia Litigation Lawyers. Having worked in Litigation and Dispute Resolution for over…..

Deneil Brown, Chief Operating Officer, Axia Litigation Lawyers
Deneil Brown

Chief Operating Officer

Deneil has been immersed in the legal industry for over 25 years and has vast experience across practice management, accounts and paralegal…

Nakita Brown, Senior Associate, Axia Litigation Lawyers
Nakita Brown

Senior Associate

Nakita is an experienced commercial litigation lawyer, bringing over ten years of legal knowledge to the table. She spent her early career…

Shane Ulyatt, Senior Associate, Axia Litigation Lawyers
Shane Ulyatt

Senior Associate

With a specialised focus on civil and commercial litigation and dispute resolution, Shane expertly handles a broad spectrum of legal matters…

Sam nelson

Lawyer

Sam’s expertise of commercial and civil litigation ranges from building and construction disputes, commercial and retail shop lease matters ….

Adam Brown
Adam Brown
Managing Director

Adam is the founder and Managing Director of Axia Litigation Lawyers. Having worked in Litigation…..

Deneil Brown
Deneil Brown
Chief Operating Officer

Deneil has been immersed in the legal industry for over 25 years and has vast experience across…

Nakita Brown
Nakita Brown
Senior Associate

Nakita is an experienced commercial litigation lawyer, bringing over ten years of legal knowledge…

Shane Ulyatt
Shane Ulyatt
Senior Associate

With a specialised focus on civil and commercial litigation and dispute resolution, Shane expertly…

Sam Nelson
Sam Nelson
Lawyer

Sam’s expertise of commercial and civil litigation ranges from building and construction disputes…

Every Move Matters

What are the Alternatives to Insolvency?

When facing insolvency, understanding the options available is crucial for making informed decisions that can potentially save a company from insolvency or mitigate the impacts of financial distress. Below, we outline key alternatives, each with unique processes and outcomes, which may allow a company to address its financial challenges in a structured and legally compliant manner.

Small Business Restructuring is a process designed for financially distressed but viable small businesses to restructure their debts. Introduced to provide a more streamlined and less costly process for small businesses, it allows the business to propose a restructuring plan to its creditors while continuing to trade under the control of its directors. A Small Business Restructuring Practitioner is appointed to help the business prepare the plan, certify it to creditors, and oversee its implementation once approved. This process aims to allow the business to survive, preserve jobs, and provide a better return to creditors than immediate winding up.

Prior to engaging in Small Business Restructuring, there are several key eligibility criteria and obligations that a business must satisfy. These include having total liabilities of less than $1 million, being up-to-date with tax lodgment obligations, and not having undergone a small business restructuring or simplified liquidation process in the preceding seven years. Additionally, employee entitlements such as wages and superannuation must be paid up to date.

Voluntary Administration is a process designed to resolve a company’s financial distress and allow it to either come to an agreement with its creditors or efficiently wind up the company’s affairs. The process involves the appointment of an independent administrator who takes full control of the company to assess all options. The objective is to maximise the chances of the company continuing in existence or, if this is not possible, to administer a better return for creditors than an immediate winding up of the company. The administrator will investigate the company’s affairs, report to creditors, and recommend whether the company should enter into a deed of company arrangement, go into liquidation, or be returned to the directors.

Receivership is a process whereby a secured creditor, usually a financial institution, appoints an independent receiver to take control of specific assets of a company or the entire company. The role of the receiver is to collect and sell enough of the company’s charged assets to repay the debt owed to the secured creditor. This process does not necessarily involve the company being wound up, and the receiver’s primary duty is to the creditor that appointed them. However, the receiver must also ensure that the company’s assets are sold for their market value or higher.

While the receiver’s main duty is to the secured creditor, they must also consider the interests of all stakeholders, including other creditors, to ensure fair treatment.”

Creditors Voluntary Liquidation (CVL) is a self-initiated process by the company’s directors when they conclude that the company is insolvent and unable to pay its debts. The process starts with a board resolution that the company cannot continue due to its liabilities, followed by a meeting of shareholders to resolve that the company be wound up voluntarily. Subsequently, a meeting of the company’s creditors is convened, where the creditors may appoint a liquidator to manage the liquidation process. This involves realising selling the company’s assets and distributing the proceeds to the creditors. A CVL provides a structured and equitable method to distribute assets and allows the directors to demonstrate their cooperation and commitment to addressing the company’s financial issues.

Court Liquidation is a formal process initiated by a creditor’s application to the court to have the insolvent company wound up in order to recover outstanding debts. This step is typically considered a last resort after other debt recovery attempts have been exhausted. Once the court orders the liquidation, a liquidator is appointed to oversee the winding up of the company. The liquidator’s role is to collect and sell the company’s assets, investigate the company’s financial affairs, report to creditors, and distribute any proceeds to the creditors according to the legal order of priority.

Each alternatives to insolvency has its own set of legal implications and procedures. It is imperative for businesses to seek professional legal advice to understand which option best suits their circumstances and to navigate the complexities of the process.

Frequently Asked Questions About Insolvency

Insolvency occurs when an individual or company lacks the financial resources to pay debts as they fall due, with liabilities outweighing assets. It’s a legal state that can lead to bankruptcy for individuals or liquidation for companies.

Warning signs include consistent difficulties in cash flow, increasing debt levels that are unmanageable, creditors remaining unpaid beyond standard payment terms, and legal action being taken against your company for outstanding debts.

Before taking the significant step of declaring insolvency, it is crucial to evaluate all other options with the help of professional advice. Engaging with legal and financial advisors can provide insight into negotiating repayment plans, formal debt agreements, refinancing options, and business restructuring strategies. These professionals can offer guidance tailored to your specific financial situation, which could improve financial viability and potentially avoid the ramifications of insolvency.

Directors have a legal obligation to cease trading if they determine the company is insolvent, as continuing to incur debts may be deemed insolvent trading. To avoid potential personal liability for insolvent trading, as well as civil or criminal penalties under the Corporations Act 2001 (Cth), it is imperative that directors take immediate action to address the insolvency, which may include stopping the company’s operations.

Directors are legally obligated to prioritise creditor interests, avoid reckless financial decisions that exacerbate debt, and act promptly to mitigate financial decline and asset dissipation.

Directors may face personal financial liability if they have provided personal guarantees for business loans or have been found to engage in wrongful or insolvent trading. Additionally, personal liability may arise if directors fail to act with the required level of care and diligence, breach their fiduciary duties, or fail to pay employee entitlements such as superannuation and PAYG withholding taxes.

In voluntary administration, the directors of a financially distressed company appoint an independent administrator to takes control of the company to perform a full assessment of financial affairs and present options to creditors. The administrator aims to maximize the chances of the company’s survival or to ensure a better return for creditors than immediate liquidation. The administrator presents a report to creditors, who then vote on the future of the company, which may include returning the company to the directors, entering into a deed of company arrangement (DOCA), or proceeding to liquidation.

A Deed of Company Arrangement (DOCA) is a binding agreement between a company and its creditors as an outcome of the voluntary administration process. It outlines how the company’s affairs will be dealt with, which may include provisions for the repayment of debts, restructuring of the company, or the sale of assets to satisfy creditor claims.

The purpose of a DOCA is to maximize the chances of the company continuing to operate, or to provide a better return for creditors than an immediate winding up of the company. The terms of a DOCA are voted on by creditors and, once approved, must be adhered to by all parties. The DOCA binds all unsecured creditors, even if they voted against the proposal, as well as on secured creditors who voted in favor, as long as the necessary statutory majority is achieved.

The DOCA is administered by a deed administrator, who oversees the implementation of the arrangement and ensures compliance with its terms. It is a flexible tool that can be tailored to the circumstances of the company and can be an effective means of allowing a company to survive financial distress and return to viability.

In insolvency, the distinction between secured and unsecured creditors is significant as it determines the priority of claims against the insolvent estate:

Secured Creditors: Secured creditors are those who have a charge, such as a mortgage or a lien, over some or all of the debtor’s assets. This security interest gives them the right to seize and sell the specific assets to which their security relates in order to satisfy the debt owed to them if the debtor defaults. Secured creditors are generally paid first from the proceeds of the sale of the secured assets.

Unsecured Creditors: Unsecured creditors do not have any security interests in the debtor’s assets. This group includes suppliers, customers, utility companies, and the ATO for certain non-priority tax debts who do not hold security interests against the debtor’s assets. In the event of insolvency, unsecured creditors typically rank after secured and preferential creditors and may only receive a proportion of what is owed to them, if anything, once the secured creditors have been paid. This is often done through dividends distributed by the trustee or liquidator from the remaining assets of the insolvent estate.

The order of payment in insolvency is a critical aspect of the process, with secured creditors holding a preferential position over unsecured creditors, who bear a higher risk of loss.

A statutory demand is a formal written request for payment issued under Section 459E of the Corporations Act 2001 (Cth), which requires a company to pay a debt that is due and payable. The debt must exceed the statutory minimum amount and the demand must provide the company with 21 days to either pay the debt or secure or compound for it to the creditor’s satisfaction or challenge the demand.

The statutory demand serves as a preliminary step before initiating winding-up proceedings against a company. If the company fails to respond to the statutory demand within the 21-day period, it is presumed to be insolvent. This presumption allows the creditor to apply to the court for the company to be wound up in insolvency. The company can dispute the demand if there is a genuine dispute over the debt, if there is a defect in the demand that causes substantial injustice, or if the company has an offsetting claim.

The statutory demand is a powerful tool for creditors and serves as a critical warning for companies. It underscores the importance of addressing debts promptly and can be an indicator of a company’s solvency. If a company cannot satisfy or challenge a statutory demand, it may be a sign that it needs to consider insolvency options or restructuring advice.

The minimum amount for a statutory demand under Section 459E of the Corporations Act 2001 (Cth) is currently set at $4,000.

Please note that changes to legislation can occur, for example this amount was temporarily increased to $20,000 during the COVID-19 pandemic but was subsequently decreased to $4,000. It is advisable to check the latest legal resources or consult with a legal professional who can provide up-to-date advice on the current threshold for issuing a statutory demand in Australia.

Ignoring a creditor’s statutory demand can have severe repercussions. If your company does not respond to a statutory demand within 21 days by either paying the debt, disputing it (via an application to the court to set it aside), or reaching a settlement, the company is presumed insolvent, and the creditor has the right to apply to the court to have the company wound up in insolvency. This can result in the appointment of a liquidator, the sale of company assets and the eventual closure of your business. Seeking legal advice immediately upon receiving a statutory demand is critical.

Yes, in some cases. You may be able to stop a creditor from initiating bankruptcy or liquidation proceedings by:

  • Negotiating with creditors to come to a payment arrangement.
  • Challenging the debt in court if it is disputed.
  • For individuals filing a proposal for a debt agreement or personal insolvency agreement under the Bankruptcy Act 1966 (Cth) if you meet the criteria.
  • For companies, you may enter voluntary administration or pursue restructuring options. Legal advice can help you determine the best strategy.

In the event of liquidation, employees are entitled to claim for unpaid wages, superannuation, leave entitlements, and redundancy pay. These claims are treated as a priority over unsecured creditors. The Fair Entitlements Guarantee (FEG) may provide financial assistance to eligible employees if the company cannot meet its obligations.

The Fair Entitlements Guarantee (FEG) is an Australian government program that provides financial assistance to employees who have lost their jobs due to their employer’s insolvency. If a company goes into liquidation and is unable to pay employees their owed entitlements, FEG steps in to cover certain unpaid entitlements. These include:

  • Unpaid wages (up to 13 weeks).
  • Unpaid annual leave.
  • Unpaid long service leave.
  • Payment in lieu of notice (up to 5 weeks).
  • Redundancy pay (up to 4 weeks per full year of service).

FEG does not cover superannuation or entitlements related to discretionary bonuses or commissions.

To be eligible for FEG assistance, employees must meet certain criteria, including:

  • The employer must have entered liquidation or bankruptcy.
  • The employee’s termination must have been due to the insolvency.
  • The employee must have lodged a claim within 12 months of their termination or the date of insolvency, whichever is later.

FEG aims to provide financial protection for employees who lose their jobs due to the financial collapse of their employer.

Visit The Fair Entitlements Guarantee Website Here

The role of a liquidator in corporate insolvency is to manage the winding-up of a company that is unable to pay its debts. The liquidator’s duties are outlined in the Corporations Act 2001 (Cth) and include the following key responsibilities:

  1. Asset Realisation: The liquidator must identify, secure, and sell the company’s assets to convert them into cash.
  2. Creditor Communication: They must communicate with creditors about the liquidation process, including calling meetings and providing reports on the progress of the liquidation.
  3. Debt Recovery: The liquidator investigates and takes action to recover debts owed to the company.
  4. Distribution of Proceeds: After asset realisation and debt recovery, the liquidator distributes the proceeds to creditors in accordance with the legal priority of claims.
  5. Investigation: They must investigate the company’s financial affairs, including uncovering any unfair preferences, uncommercial transactions, or potential misconduct by directors.
  6. Reporting Obligations: Liquidators are required to report to ASIC any offences they believe may have been committed by company officers.
  7. Finalisation: They must ensure that all of the company’s legal and reporting obligations are met, and ultimately, apply to deregister the company, which marks the formal end of the liquidation process.

The liquidator acts as an independent and impartial officer of the court, even if they are appointed by the company’s creditors or directors. Their primary obligation is to collect and distribute the company’s assets fairly among its creditors and contribute to the overall integrity of the insolvency process.

Please note that the information provided in these FAQs is general in nature and is not intended as legal advice. For guidance specific to your situation, and to discuss your options when facing insolvency, we recommend consulting with one of our qualified legal professionals.

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Discover the latest insights on commercial disputes, building and construction, insolvency, personal injury, and more. Explore all our articles for in-depth legal updates from Axia Litigation Lawyers.

Discover the latest insights on commercial disputes, building and construction, insolvency, personal injury, and more. Explore all our articles for in-depth legal updates from Axia Litigation Lawyers.

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