Glossary of terms

Here is a list of some of the insolvency-related words found throughout this website and in ARITA publications and material.

AFSA

The Australian Financial Security Authority is the government agency responsible for the administration and regulation of the personal insolvency system in Australia.

Appointment, Appointee, or Formal Appointment

The formal appointment of a Practitioner as a trustee in bankruptcy, a trustee  appointed under s 50 of the Bankruptcy Act, a debt agreement administrator under Part IX, or a trustee under Part X; or as a liquidator or provisional liquidator, a voluntary administrator or a deed administrator under Part 5.3A of the Corporations Act, or as a controller; or as a scheme manager under Part 5.1. The word “Appointee” has a parallel meaning.

ARITA

Refers to the Australian Restructuring Insolvency & Turnaround Association.

ARITA Professional Member

A category (the highest) of member of the Australian Restructuring Insolvency & Turnaround Association.

ASIC

The Australian Securities and Investments Commission, Australia’s corporate, markets and financial services regulator.

Bankrupt

A person who has been placed in bankruptcy as they are unable to pay their debts when due.

Bankruptcy Act 1966 (CTH)

The Commonwealth Act covering personal insolvency in Australia.

Cash Flow

The movement of money into or out of a business, project, or financial product. It is usually measured during a specified, finite period of time.

Corporations Act 2001 (CTH)

The Commonwealth Act regulating corporate insolvency in Australia.

Creditor

Someone to whom money, or an equivalent, is owed. See unsecured creditor and secured creditor

Deed of company arrangement

A deed of company arrangement (DOCA) is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with, which is accepted by creditors as the outcome of a voluntary administration.

Director

An appointed or elected member of the board of directors of a company who, with other directors, has the responsibility for determining and implementing the company’s policy. Can also extend to individuals who undertake the role of a director without having been formally appointed or elected.

Employee

Someone who is paid wages, a salary or commission, and engaged by a company under an award, Certified Agreement, Australian Workplace Agreement, or a contract of employment.

FEG

The Fair Entitlements Guarantee (FEG) is a payment scheme designed to assist employees whose employment has been terminated due to the liquidation or bankruptcy of their employer and who are owed certain employee entitlements. FEG is administered by the Department of Employment and Workplace Relations (DEEWR).

Insolvent

When a business, company or person is unable to pay their debts when they are due

Liquidation

Liquidation is the orderly winding up of a company’s affairs. It involves realising the company’s assets, cessation or sale of its operations, distributing the proceeds of realisation among its creditors and distributing any surplus among its shareholders.

Practitioner

Refers to a person who acts under a formal appointment, and, unless otherwise indicated, includes the Practitioner’s Firm, partners and managerial employees.

Receivership

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

Secured creditor

Someone who has a security interest (as defined in s12 of the Personal Property Securities Act 2009), such as a charge or a mortgage, over some or all of the company’s assets, to secure a debt owed by the company. Lenders usually require a security interest over company assets when they provide a loan.

Shareholder

Someone who has part or whole ownership of a company through ownership of some or all of its shares

Unsecured creditor

A creditor who is owed money and does not have a security interest over the company’s assets.

Voluntary administration

Voluntary administration is a procedure where a voluntary administrator is appointed to a company. 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. It aims to maximise the chances of the company, or as much as possible of its business, continuing, or to provide a better return for creditors than an immediate winding up of the company, or both.