Australia: Insolvency/Bankruptcy

Directors using credit cards to pay company tax debts may be unknowingly converting corporate liabilities into personal obligations. What appears to be a simple cash flow solution with bonus reward points could expose directors to significant personal financial risk if the company later becomes insolvent.

Asset protection during bankruptcy depends on genuine ownership, not trust labels. Property held for others is generally excluded from a bankrupt estate, but beneficial interests, trust debts, and trustee indemnities may still be recoverable. Transfers into trusts can be challenged under undervalue or creditor-defeating provisions if timing, consideration, and purpose raise concerns.

Voluntary Administration under Part 5.3A of the Corporations Act 2001 offers Australian companies a formal insolvency process where an independent liquidator investigates whether the business can be preserved. During this process, most unsecured claims are stayed while creditors, employees, and secured parties navigate distinct rights and exceptions. Understanding the strategic timing for directors, the decision-making power of creditors, and the specific protections available to employees proves critical t

Construction businesses can appear profitable while facing severe cash flow crises. Victor Zhou, a fractional CFO specializing in construction, reveals why cash shortages develop in building and development firms, how to spot warning signs before it's too late, and why securing additional funding often masks deeper structural problems that continue draining resources.

A Queensland Supreme Court case demonstrates how a poorly drafted deed of priority left a lender unable to recover $32.3 million in development completion costs ahead of a junior lender's debt. The decision reveals critical gaps in standard priority deed language when a developer collapses and a mortgagee must fund completion from their own resources.

Bankruptcy trustees can challenge pre-bankruptcy transactions under sections 120, 121, and 122 of the Bankruptcy Act 1966, targeting undervalued transfers, creditor-defeating arrangements, and preferential payments. Understanding the statutory tests, timing rules, and evidentiary requirements is essential for recipients facing clawback demands, as market value alone does not guarantee protection and poor documentation can prove decisive.

A New South Wales Court of Appeal decision examines how arbitration agreements operate when only part of a dispute is arbitrable, particularly in complex insolvency contexts. The ruling clarifies when proceedings can be split between court and arbitration, establishes limits on arbitrability in insolvency matters, and sets a high threshold for waiving arbitration rights.

Builder insolvency has become increasingly common across Australia’s residential construction sector. In the 2023–2024 financial year, almost 3,000 construction companies entered external administration, representing about 27% of all corporate insolvencies in Australia.

The deregistration of a company brings its legal existence to an end and often finalises the formal affairs of that company. Stakeholders, particularly insolvency practitioners, may seek reinstatement of a company to recover assets, resolve claims, correct administrative errors, or pursue legal proceedings.