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.

In brief

Assignments for benefit of creditors (“ABCs”) and receiverships have been utilized effectively for centuries under the common law, side-by-side as separate and distinct and complementary remedies for liquidating assets.

Differences

Differences between the two are that:

This article discusses the defining features of Bermuda’s insolvency landscape and the primary insolvency and rescue procedures available under Bermuda law, including compulsory liquidations, provisional liquidations and schemes of arrangements. The case of Chishti v Afiniti Ltd is presented as a recent example of a company successfully availing itself of a restructuring plan through the use of ‘light touch’ provisional liquidation.

Despite meeting statutory jurisdictional requirements under Part 26A of the Companies Act 2006, the High Court declined to exercise its discretion in favour of sanctioning Waldorf Production UK Plc’s restructuring plan in August 2025due to concerns about fair allocation of value and lack of meaningful engagement with unsecured creditors.

Welcome to the final edition of Buddle Findlay's insolvency and restructuring update for 2025. As we head towards the silly season and a well-deserved break for many, it's an opportunity to reflect on what has been a very busy year in the insolvency and restructuring space.