Associated entity (in the context of bankruptcy)

Associated entity (in the context of bankruptcy) in the context of bankruptcy, an associated entity is described in section 5 of the Bankruptcy Act 1966 (Cth) as being, in relation to a person:

• an entity, other than a company, that is, or has been, associated with the person; or
• a company that is, or has been, associated with the person at a time when the company, is or was, as the case may be, a private company.

A bankrupt’s dealings with an associated entity is particularly relevant when it comes to an appointed trustee in bankruptcy examining the affairs of a bankrupt. Under section 19AA of the Bankruptcy Act 1966 (Cth) a trustee has the power to investigate an associated entity of a bankrupt. They have this power due to the extension of the meaning of “examinable affairs” of a bankrupt, whereby an associated entity’s financial affairs may be examined to the extent that their conduct may be relevant to the examination of a bankrupt’s estate.

Sections 5B-5E of the Bankruptcy Act 1966 (Cth) details the precise nature of how a person’s relationship to a company, a natural person, a partnership or a trust may deem them to be an associated entity. For example a company may be associated with a person if the person has a control or a material influence over the company’s affairs (e.g. a director or manager), a person may be associated with another person if they are a trustee or hold joint property, partners in a partnership will almost always invariably amount to an associated entity and a trust may be associated with a person if that person is the trustee or is able to influence materially the activities of the trust.