Strategic Guidance Through Financial Challenges

No matter what our clients’ role in an insolvency or bankruptcy matter is, we strive to help our clients manage financial challenges with clarity, respect, compassion, and efficiency.

We advise companies, directors, creditors, and individuals on all aspects of insolvency and bankruptcy law. Whether you are facing financial distress or seeking to recover debts, our team delivers strategic, solution-focused advice tailored to your circumstances under the Bankruptcy Act.

Corporate Insolvency vs Personal Bankruptcy: What’s the Difference?

These terms are often used interchangeably, but they apply to different situations and follow different legal processes.

Corporate insolvency applies to companies that cannot pay their debts as and when they fall due. Depending on the circumstances, a company may go through:

Voluntary administration: a temporary process giving the company breathing space to restructure or be sold while protected from creditor action
Liquidation: the formal winding up of a company, where a liquidator is appointed to realise its assets and distribute proceeds to creditors
A Deed of Company Arrangement (DOCA): a binding agreement between the company and its creditors, often used to settle debts for less than the full amount owed while allowing the company to continue trading

Personal bankruptcy, by contrast, applies to individuals who cannot pay their personal debts. It is governed by the Bankruptcy Act 1966 (Cth) rather than the Corporations Act, and typically results in a trustee taking control of the bankrupt person’s assets for a set period, usually three years, to repay creditors as far as possible.

Directors should be aware that company insolvency does not automatically mean personal bankruptcy — but directors can become personally liable in certain circumstances, including insolvent trading, which is why early advice matters for both the company and its directors individually. For guidance on director obligations during financial distress, see our corporate lawyers Sydney page.

Corporate Insolvency Guidance

For businesses, we provide guidance on voluntary administration, liquidation, restructuring, and directors’ duties during insolvency. We work closely with insolvency practitioners to protect your interests and, where possible, explore opportunities for business survival or orderly wind-downs. Our team actively addresses insolvency notices as they arise, offering dedicated guidance on statutory demands under Section 459E of the Corporations Act, including both issuing demands as a creditor and responding to demands served against your company (for more details, see our statutory demand lawyer page). Directors managing companies in financial distress must carefully balance their statutory duties; see our corporate lawyers Sydney page for comprehensive guidance on director obligations.

Personal Bankruptcy and Debt Recovery

For individuals, we assist with personal bankruptcy matters, including creditor negotiations, alternatives to bankruptcy, and responding to bankruptcy notices. We also act for creditors looking to recover outstanding debts, including initiating bankruptcy proceedings and navigating the insolvency process. Creditors seeking to recover outstanding debts often start with formal recovery action; see our litigation page for the full enforcement pathway.

Frequently Asked Questions

How do I know if my company is insolvent?

A company is insolvent if it cannot pay its debts as and when they fall due. Common warning signs include consistently late payments to suppliers, reliance on personal funds or further borrowing to meet day-to-day expenses, overdue tax or superannuation obligations, and creditors threatening or commencing recovery action. If any of these apply to your business, get advice promptly, acting early significantly increases the options available, including restructuring outside formal insolvency.

Can a director be held personally liable for company debts?

Generally, no, a company’s debts are the company’s responsibility, not the director’s personally. However, directors can become personally liable in specific circumstances, most importantly insolvent trading, where a director allows the company to continue incurring debts after it became insolvent or after there were reasonable grounds to suspect insolvency. Directors can also face personal liability for unpaid PAYG withholding and superannuation guarantee amounts under director penalty notice provisions.

What is voluntary administration and how long does it last?

Voluntary administration is a process that gives a company temporary protection from creditor action while an independent administrator assesses the company’s affairs and recommends a way forward, typically liquidation, a Deed of Company Arrangement, or returning control to the directors. The process generally runs for around 20 to 25 business days before creditors vote on the administrator’s recommendation, though this can be extended by the court in more complex matters.

Can I be made bankrupt over a business debt?

Yes. If you provided a personal guarantee for a business debt, ran a business as a sole trader, or are personally liable for a company debt due to a director liability provision, a creditor can pursue bankruptcy against you personally for that debt, separately from any action against the company. This is one of the most important reasons to understand exactly what you have personally guaranteed before signing any business finance or lease agreement.

Does bankruptcy affect my ability to work or hold a directorship?

Bankruptcy generally prevents you from acting as a company director for the duration of the bankruptcy, and certain licensed professions and occupations have their own restrictions on practising while bankrupt. Bankruptcy is also recorded on the National Personal Insolvency Index, which can affect future credit applications. The practical impact varies significantly depending on your profession and circumstances, which is why personalised advice matters before deciding on this path.

Is liquidation the same as bankruptcy?

No. Liquidation applies to companies and is governed by the Corporations Act — a liquidator is appointed to wind up the company’s affairs, and the company itself ceases to exist once the process concludes. Bankruptcy applies to individuals and is governed by the Bankruptcy Act. A director’s company can be placed into liquidation without the director personally becoming bankrupt, unless the director has separate personal liability for the company’s debts.

Facing Insolvency or Bankruptcy?

When facing financial challenges, timely legal advice is crucial. Our team is ready to provide compassionate and effective guidance on insolvency and bankruptcy matters, helping you find a clear path forward.

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Insolvency & Bankruptcy