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

In a recent case, the Victorian Supreme Court said that an accountant ‘would know well that a statutory demand involves strict time frames for response and potentially very significant consequences for a company’. The accountant failed to take appropriate steps to inform the company of the statutory demand.

The statutory demand process

If a company does not comply with a statutory demand within 21 days of service, it is deemed to be insolvent and the creditor may proceed to wind up the company.

A recent court decision considers the legal principles and sufficiency of evidence when a court-appointed receiver seeks approval of their remuneration.

A court-appointed receiver needs court approval for the payment of their remuneration. The receiver has the onus of establishing the reasonableness of the work performed and of the remuneration sought.

A Supreme Court in Australia has dismissed an application by a UK company’s moratorium restructuring practitioners for recognition of a UK moratorium and ordered that the company be wound up under Australian law.

The decision provides insights into the interaction between cross-border insolvencies and the winding up in Australia of foreign companies under Australian law.

Introduction

In the matter of Hydrodec Group Plc [2021] NSWSC 755, delivered 24 June 2021, the New South Wales Supreme Court:

It is possible for a trustee in bankruptcy to make a claim to property held by a bankrupt on trust. For example, by lodging a caveat over a home that is held on trust.

A trustee in bankruptcy may be able to make a claim, relying on the bankrupt’s right of indemnity as trustee of the trust. This is because the bankrupt’s right of indemnity, as trustee, is itself property that vests in the trustee in bankruptcy under the Bankruptcy Act 1966.

Explaining a trustee’s right of indemnity