Term
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Definition
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AFSA – Australian Financial Security Authority
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The Australian government agency responsible for regulating personal insolvency.
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ARITA – Australian Restructuring Insolvency & Turnaround Association
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The Australian association for insolvency and restructuring professionals.
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ASIC – Australian Securities and Investments Commission
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The Australian government agency responsible for regulating corporate insolvency.
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Asset
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Something of value owned by a person or company.
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Bankrupt
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A person who has been placed in bankruptcy.
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Bankruptcy
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A personal insolvency procedure where people who can’t pay their debts give up their assets and control of their finances, either by agreement or court order, in exchange for protection from legal action by their creditors.
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Bankruptcy Act 1966
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The legislation regulating personal insolvencies in Australia.
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Corporate insolvency
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Insolvency that relates to a company – as opposed to a person. Corporate insolvency procedures include:
- liquidation
- receivership
- voluntary administration.
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Corporations Act 2001
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The legislation regulating companies in Australia, including corporate insolvencies.
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Creditor
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A creditor is owed money by a person or company (the debtor).
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Creditors’ voluntary liquidation
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A type of liquidation that is initiated by the company.
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Debt
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An amount of money that is owed to a person or company for goods supplied or services provided.
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Debt agreement
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A flexible alternative to bankruptcy, a debt agreement is a legally binding agreement between a debtor and their creditors to repay the debt – usually for a lesser amount – by instalments.
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Debt agreement administrator
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A person or company appointed to administer a debt agreement. Doesn’t have to be a registered trustee.
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Debtor
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A debtor owes money to a person or company (the creditor).
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Deed administrator
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The insolvency practitioner appointed to carry out a deed of company arrangement.
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Deed of company arrangement
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A legally binding arrangement between a company and its creditors following a voluntary administration. The deed sets out how the company’s affairs and assets will be managed.
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Insolvency practitioner
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A professional who is registered by a regulator – AFSA and/or ASIC – and is authorised to administer insolvency procedures. Insolvency practitioners are often fully qualified accountants. Because of their specialist knowledge they are uniquely qualified to advise businesses and individuals on a wide range of insolvency-related issues and can support them through financial difficulties. See also Registered Trustee and Registered Liquidator.
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Insolvent
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When a person or company is unable to pay their debts when they are due for payment.
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Insolvent trading
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Occurs when a company that is already insolvent takes on more debt. Company directors can be held personally responsible for repaying debts taken on when a company is insolvent.
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Liability
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A legal obligation to pay a person or company.
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Liquidation
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A process which results in a company being shut down. All the company’s assets are sold, and the money raised is used to repay its debts. The term ‘winding-up’ is also used. The four types of liquidation are:
- official liquidation
- creditors’ voluntary liquidation
- provisional liquidation
- members’ voluntary liquidation.
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Liquidator
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The insolvency practitioner appointed to administer the liquidation of a company.
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Members’ voluntary liquidation
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A type of liquidation for solvent companies, that is initiated by the company. All the company’s creditors are paid in full.
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Official liquidation (or court liquidation)
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A type of liquidation that is initiated by a court order.
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Personal insolvency
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Insolvency that relates to a person – as opposed to a company. Personal insolvency procedures include:
- bankruptcy
- debt agreement
- personal insolvency agreement.
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Personal insolvency agreement
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A legally binding agreement between a debtor and their creditors to repay the debt – usually for a lesser amount – by instalments.
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Personal property
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Assets other than land and buildings. Includes cars, boats, business inventory, intellectual property (e.g. copyright and patents), bank accounts and debts.
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Personal Property Securities Act – PPSA
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PPSA is a law about security interests in personal property.
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| Personal Property Securities Register – PPSR |
A national online register that records information about security interests. It is administered by AFSA. |
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Phoenixing
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When a new company is created to continue the business of a company that has been deliberately liquidated to avoid paying its debts.
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Provisional liquidation
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A type of liquidation where a liquidator is appointed as a caretaker to safeguard a company’s assets while the court considers a winding-up application.
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Realise
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Convert assets into cash, usually by selling them.
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Receiver
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An insolvency practitioner appointed by a secured creditor under a receivership. A receiver may also be appointed by the Court.
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Receivership
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A process which entitles a secured creditor to appoint an insolvency practitioner as a receiver to a company. The receiver’s role is to take control of the secured assets to repay the secured debt. The loan agreement gives the creditor a right to appoint a receiver under certain conditions.
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Registered Liquidator
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An insolvency practitioner who is registered as a liquidator with ASIC. Only a Registered Liquidator can administer corporate insolvency procedures.
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Registered Trustee
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An insolvency practitioner who is registered as a trustee with AFSA. Only Registered Trustees can administer bankruptcies and personal insolvency agreements.
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Restructuring
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The process of reorganising the ownership, financing and/or operations of a company with the goal of making it more profitable. See also turnaround.
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Secured creditor
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A creditor that has security for a loan.
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Security
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An asset pledged to guarantee the repayment of a debt. Security is intended to cover the debt amount if the debtor can’t pay it back.
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Security interest
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Personal property used as security. Usually recorded on the Personal Property Securities Register.
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Solvent
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When a person or company is able to pay their debts when they are due for payment.
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Trade creditor
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A person or company that has supplied goods and/or services to the debtor and remains unpaid.
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Trustee in bankruptcy (or simply ‘trustee’)
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An insolvency practitioner who administers a bankruptcy or personal insolvency agreement.
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Turnaround
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The process of reviving a struggling company.
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Unsecured creditor
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A creditor that does not have security for a loan.
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Voluntary administration
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The purpose of a voluntary administration is to rescue – if possible – a company that’s in financial difficulty. A voluntary administrator is appointed who takes control of the company and manages its affairs until the creditors decide the company’s fate.
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Voluntary administrator
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The insolvency practitioner appointed to carry out the voluntary administration of a company.
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Wind up (or ‘winding up’)
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See liquidation.
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