How do I declare insolvency as a company?
Becoming insolvent isn’t easy, and involves a lot of difficult experiences and lessons and some hard conversations. Once you have exhausted all your options, however, insolvency can end up being the most positive path forward to move on with life without the weight of debt over your head. So, once you know your company is insolvent, how do you declare insolvency?
How to declare insolvency
Technically, you're not declaring insolvency so much as you’re declaring being insolvent, which is to liquidate, go into voluntary administration or adopt another form of formal insolvency appointment. Each of them has a different process. When you enter into these, an external expert, known as a Registered Liquidator, is appointed to take over, restructure, oversee and sell off assets in order to discharge debts owing.. If you are believe you are insolvent and unable to pay your debts as and when due, you should seek guidance from your external accountant or legal advisor who will recommend a Registered Liquidator for you to meet with to explore all options available to the Company and explain the nature and consequences of each option. Most Registered Liquidators offer a free, confidential initial meeting.
Declaring bankruptcy is the legal procedure instigated by the court, or can be self instigated, that is required when you are personally insolvent (that is, you personally, as opposed to a company, cannot repay your debts). If you owe over $10000, your creditors may force bankruptcy.
How to apply for bankruptcy
Applying for bankruptcy is a fairly straightforward process, particularly if you’ve already been through the corporate insolvency processes prior to declaring. It takes anywhere from half an hour to an hour to complete the bankruptcy form, and you will be required to create a digital identity.
To be eligible, you must:
Be unable to repay debts
Are an Australian citizen and/or have an Australian connected business or residence.
When you are filing for bankruptcy, you will need to present a Statement of Affairs, and a debtor’s petition online. These documents will then go to the Australian Financial Security Authority (AFSA) for consideration and approval if the criteria for bankruptcy is met.
A trustee can then be selected by you, or one will be appointed by the AFSA.
Once approved, a notification will be sent to your creditors listed in the Statement of Affairs.
While it might not be the most exciting approvals you will ever receive, it very often is the beginning of the end of your financial hardship, and the start of a new future. Bankruptcy and becoming insolvent is often considered a traumatic experience and negative outcome. The experience of losing your business certainly can feel like that, more than reasonably. But bankruptcy itself can be positive when it’s the only outcome that lifts your financial burdens.