1. What is insolvency?
Insolvency is defined in section 95A of the Corporations Act 2001 (Cth)(Act) as the inability of a company to pay its debts when they fall due. Australian law applies a cash-flow test rather than a balance-sheet test, meaning the inquiry does not turn on the numerical gap between assets and liabilities.
Introduction
What is insolvency?
Insolvency is defined in section 95A of the Corporations Act 2001 (Cth)(Act) as the inability of a company to pay its debts when they fall due. Australian law applies a cash-flow test rather than a balance-sheet test, meaning the inquiry does not turn on the numerical gap between assets and liabilities.
Key Takeaways
Commissioner of Taxation v Runcity [2025] FCAFC 152 is the most recent decision arising from litigation involving disqualified liquidator, David Iannuzzi. In previous decisions, Mr Iannuzzi was found to have mismanaged the liquidation of 23 companies and was banned from practising as a liquidator for ten years. Eight of those companies (Companies) were deregistered between 2015 and 2016.
In Otway (liquidator), in the matter of AMD Freight Pty Ltd (in liq) (No 2) [2025] FCA 1169 the Federal Court of Australia considered an application for termination of a winding up under the Corporations Act brought by the liquidators of AMD Freight Pty Limited (In Liquidation) (Compan
Directors resign for many reasons. For example, there may be disagreements among stakeholders about the future course of the company, they may be concerned about the risks associated with financial difficulty/insolvency, or they may just wish to retire.
This is one of a series of articles we at Morton Fraser are producing to guide our clients through the wholesale change proposed in Scots law in relation to security over goods, intellectual property and shares, on the one hand, and invoice finance or the purchase of receivables, on the other. For a general introduction to what the Bill covers, see here.
UK Government introduces a temporary increase to minimum debt level required for a winding up petition
Restrictions have been in place since the start of the pandemic to prevent creditors taking steps to wind up debtor companies. Those restrictions are due to expire on September 30, 2021. To lessen the risk of October seeing a mass rush by creditors seeking to wind up their debtors, the UK Government has introduced a further temporary measure in connection with liquidation petitions.
In this two part article we highlight for directors some of the main ways in which the general protection of limited liability does not apply or can be lost.
Part one of this article discusses those exceptions to the principle of limited liability that arise in insolvency or distress situations. Part two deals with the provisions that have more general applicability.
Breach of duties