Types of Insolvency

The three most common types of corporate insolvency are voluntary administration, liquidation and receivership. 

 

What is a voluntary administration?

Voluntary administration is where the directors of a financially troubled company or a secured creditor with a charge over most of the company’s assets appoint an external administrator called a ‘voluntary administrator’.

The role of the voluntary administrator is to investigate the company’s affairs, to report to creditors and to recommend to creditors whether the company should enter into a deed of company arrangement, go into liquidation or be returned to the directors.

A voluntary administrator is usually appointed by a company’s directors, after they decide that the company is insolvent or likely to become insolvent.

What is a liquidation or a winding up?

Liquidation is the orderly winding up of a company’s affairs. It involves selling the company’s assets and distributing the proceeds among creditors and distributing any surplus to shareholders. The three types of liquidation are:

  • court
  • creditors’ voluntary, and
  • members’ voluntary.

A creditors’ voluntary liquidation is a liquidation initiated by the company. A court liquidation starts as a result of a court order, made after an application to the court, usually by a creditor of the company.

What is a receivership?

A company most commonly goes into receivership when a receiver is appointed by a secured creditor who holds security or a charge over some or all of the company’s assets. The receiver’s primary role is to collect and sell enough of the company’s charged assets to repay the debt owed to the secured creditor.

What is a deed of company arrangement (DOCA)?

A DOCA is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with, which may be agreed to as a result of the company entering voluntary administration. It aims to maximise the chances of the company continuing, or to provide a better return for creditors than an immediate winding up of the company.

Related information

What's new

Report On Company Activities and Property (ROCAP)

After an extensive revision process and industry consultation conducted through an external consultant, ASIC has released the new ROCAP - Report On Company Activities and Property to replace the RATA.

ASIC works to ensure registered liquidators comply with obligations

An ASIC review has found that while registered liquidators are mostly doing the right thing when complying with their lodgement and publication obligations, there is room for improvement. 18-172MR. 13 June 

 

Industry funding

The Government has introduced new laws that change the way ASIC is funded. Regulated entities will receive an invoice for ASIC’s regulatory services delivered in the prior year. Find out what this means for registered liquidators.

 

Quicklinks

Insolvency Law Reform Act 2016

Releases on insolvency

Liquidator registration applications

Insolvency statistics

 

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ASIC and registered liquidators

Last updated: 23/03/2016 03:13