What Does Insolvency Mean In Business?
- Posted by: Admin
- Categories: Resources, Technical Insights
According to Section 95A of the Corporations Act 2001:
“A person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable.”
What this legal definition of insolvency means for your business is that if you have stopped paying or are unable to pay your debts when they come due, your business is considered insolvent. This state of financial distress can be caused by a number of things and may lead to insolvency proceedings.
The legal aspects of business insolvency can be difficult to understand for those who don’t deal with it on a regular basis. Questions that you may have about insolvency include things like:
- How does insolvency work, and what steps do I need to take?
- What are the laws regarding insolvency, and will my business and clients be protected?
- What is an insolvency practitioner, and do I need one?
- What is insolvency accounting, and can it help me?
- What is an insolvency notice, and where do I see them?
How does insolvency work?
Under Australian law, an insolvent business may be subject to one of several types of external administration. At this point, an external administrator, also known as an insolvency practitioner, is appointed to ensure your creditors are protected and receive the maximum possible value on repayment of outstanding debts.
How each insolvency case progresses will depend on the business, how much debt a company has and which type of external administration that business opts for. But with help from our trusted advisors, you can rest assured that you will be guided through the entire process step by step.
We understand that no one plans to go into insolvency. It is a difficult situation to find yourself in, and we will handle your corporate insolvency proceedings with the utmost empathy.
Whether you are a company in financial distress or a creditor seeking legal aid for unpaid bills, we are experienced in the ins and outs of corporate insolvency law. So contact us to find out more about the services we offer and how we can help you turn your business around.