Glossary

Below are some of the commonly accepted definitions of key insolvency & reconstruction terms:

Corporate insolvency arrangements

  • Appointments made by the court usually on application by creditor owed more than $2,000
  • Powers of directors cease on liquidation
  • Is a method to voluntarily liquidate a company
  • Company must be insolvent
  • Initiated by directors
  • Shareholders hold meeting at which time they wind up the company
  • If greater than 95% of shareholders agree, company can be placed into liquidation on same day as meeting of directors
  • Meeting of creditors is held within 11 business days of appointment at which time they can appoint alternative liquidators
  • Company must be solvent
  • Initiated by directors
  • Shareholders hold meeting at which time they wind up the company
  • Appointments are generally made to finalise affairs of the company or obtain taxation benefits with shareholder distribution
  • Company must be insolvent or likely to become insolvent
  • Objective is to allow the company to continue in existence or provide a better return than liquidation
  • Proposal for a deed of company arrangement is put to creditors
  • Initiated by directors
  • Require majority in number and majority in value of creditors who vote on the propos
  • Appointments made by secured creditors or the court
  • Receivers act in the best interests of their appointor

Personal insolvency arrangements

  • Is a debt agreement
  • Is an alternative to bankruptcy offer put to creditors (e.g. weekly payments, deferral of payment, sale of assets and or lump sum payment)
  • Require majority in value of creditors who vote on the proposal
  • Must not be bankrupt or subject to Part X in last ten (10) years, unsecured creditors less than $88,379.20 and after tax income for next twelve (12) months less than $66,284.40. Note: amounts will be updated by AFSA.
  • Is an alternative to bankruptcy
  • Proposal is put to creditors (e.g. weekly payments, deferral of payment, sale of assets, associated parties not participate with dividend and or lump sum payment)
  • Require majority in number and greater than 75% in value of creditors who vote on the proposa
  • Voluntary bankruptcy – filing debtor’s petition and statement of affairs with AFSA
  • Involuntary bankruptcy – sequestration / court order issued on application by creditor owed more than two (2) years
  • Assuming bankrupt is cooperative and discharges duties and responsibilities, will be discharged three (3) years from date of filing a statement of affairs.
  • Divisible property vests in the Trustee in Bankruptcy
  • Indexed amounts – The Bankruptcy Act and Regulations contain a number of thresholds, limits and other amounts that are regularly indexed (changed in line with the Consumer Price Index or the base pension rate). View the index on the AFSA website.
  • Appointments made by the Court to sell assets
  • Usually involves dispute between owners of assets

If there is a term not here that you would like us to explain, please contact us using the form on this page.

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