In article: When a company goes into insolvent liquidation, the directors are required to complete a Report on Company Activities and Property (ROCAP) which replaces the previous Report as to Affairs (RATA) The ROCAP is more comprehensive than the RATA…
Pursuant to section 459C(2) of the Act, an application to wind up a company in insolvency must be done within 3 months of the date that a company is presumed to be insolvent.
Insolvency occurs when a business or an individual is unable to meet their debts as they become due and payable. There is a distinction in Australian law between bankruptcy (applies to individuals) and insolvency (applies to corporate bodies), and each has its own particular process. Read our article to learn more about corporate insolvency and personal bankruptcy.
The case of ASIC v Plymin is significant for lawyers because it sets out a list of indicators that can help us understand when a company will be found to be insolvent. The general rule in law is that company insolvency is proven by a cash-flow test not a balance sheet test.
Whenever a business considers lending money or selling goods it should consider whether it might be worthwhile to protect that lending with a personal property security, such as a PMSI. This will place the business in a much better position if the debtor goes bust. However, if you are creditor (or former creditor) and end up receiving a demand from a liquidator relating to an unfair preference, don’t despair.