Corporate Insolvency
Insolvency & Bankruptcy
Key Takeaway
When a company faces financial distress, timely advice and decisive action can make the difference between survival and liquidation.
When a company faces financial distress, timely advice and decisive action can make the difference between survival and liquidation. Our corporate insolvency team advises directors, creditors, and stakeholders on options for financially troubled companies, including voluntary administration, deeds of company arrangement, and liquidation processes under the Corporations Act 2001.
Understanding the legal obligations of directors when a company is insolvent is critical. Directors risk personal liability for insolvent trading, unremitted PAYG withholding, and GST if they continue trading while insolvent. We provide clear, practical advice to directors navigating the complex intersection of corporate law and financial distress.
Director Obligations When Insolvent
Directors of an insolvent company must balance their duty to creditors against their desire to continue trading and potentially turn the business around. Under section 588G of the Corporations Act 2001, directors have a positive duty to prevent insolvent trading — incurring debts when the company is insolvent or becomes insolvent by incurring that debt. The penalty for breach includes civil and criminal liability, with directors potentially required to compensate the company for losses. Directors also face personal liability for unpaid PAYG withholding, GST, and superannuation through director penalty notices issued by the ATO.
Voluntary Administration & DOCAs
Voluntary administration under Part 5.3A of the Corporations Act provides a breathing space for financially distressed companies. An independent administrator takes control of the company and investigates its affairs, reporting to creditors on options including a deed of company arrangement (DOCA), liquidation, or return to director control. A DOCA is a binding arrangement between the company and its creditors that may allow the company to continue trading while paying creditors a negotiated dividend over time. The administration process also offers protection from unsecured creditor enforcement actions and certain secured creditor actions during the decision period.
Liquidation & Creditors' Rights
When a company cannot be saved, liquidation is the process of winding up its affairs, realising assets, and distributing proceeds to creditors in the order required by law. In a creditors' voluntary liquidation, shareholders resolve to wind up the company and appoint a liquidator. In court liquidation, a creditor or other party applies to the Court. The liquidator investigates the company's affairs, may pursue recoveries including unfair preferences and uncommercial transactions, and reports misconduct to ASIC. Creditors should lodge their proofs of debt promptly and may be entitled to vote on liquidator decisions at meetings.
Corporate Insolvency FAQs (Queensland Law)
How does voluntary administration work under Corporations Act Pt 5.3A?
At our firm, voluntary administration under Part 5.3A of the Corporations Act 2001 provides a standstill for financially distressed companies. The administrator takes control, investigates, and presents options to creditors: accept a DOCA, proceed to liquidation, or return control to directors.
What is a Deed of Company Arrangement (DOCA)?
At our firm, a DOCA is a binding arrangement between the company and its creditors. It typically provides for creditors to receive a dividend over time while the company continues trading. A DOCA binds all unsecured creditors once approved by the required majority.
What are creditors rights in corporate insolvency?
At our firm, creditors have the right to lodge proofs of debt, vote at creditors meetings (including on the appointment of administrators and approval of DOCAs), appoint a committee of inspection, and receive reports from the administrator or liquidator.
What is director liability for insolvent trading under s 588G?
Our team helps clients with matters under section 588G of the Corporations Act imposes a positive duty on directors to prevent insolvent trading. Breach carries civil penalties, criminal liability, director disqualification, and personal liability for company debts. Defences include reasonable grounds to expect solvency.
What ASIC reporting obligations apply in insolvency?
At our firm, liquidators must report to ASIC on suspected offences including insolvent trading, uncommercial transactions, unfair preferences, and director misconduct. ASIC may investigate and take enforcement action including banning directors and seeking penalties.
Corporate Insolvency Services
- Directors' duty advice regarding insolvent trading
- Voluntary administration process and director obligations
- Deed of company arrangement (DOCA) negotiation and review
- Creditors' voluntary liquidation and court liquidation
- Receivership advice and liaison with receivers
- Pre-insolvency advice and restructuring options
- Safe harbour protections from insolvent trading liability
- Director penalty notices and ATO debt management
- Insolvent trading claims and defence
- Unfair preference claims and defence
- Phoenix activity prohibition compliance
- Creditor meetings and voting advice
Last updated: July 2026
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