Bankruptcy has a serious impact on your life. It may also affect your employment and your ability to act as the director of a company during the bankruptcy process.
The Australian Financial Security Authority (AFSA) recognises that it’s important to allow a bankrupt individual to continue working and earning an income. While there are certain restrictions in place, bankruptcy does not prevent most people from working.
In this article, we explore the employment restrictions for bankrupts, and whether bankruptcy affects your ability to operate a business or serve as a company director.
What Employment Restrictions Exist for Bankrupts?
The Bankruptcy Act does not impact your ability to continue your current employment or seek new employment. The Act does prevent you from acting as a company Director and managing a Trust in any capacity (e.g. as a Solicitor or Accountant).
Bankruptcy may affect professional licences and memberships that are required to work in your industry.
Can I Be a Company Director While Bankrupt?
The Corporations Act excludes undischarged bankrupts from holding a company directorship.
If you become bankrupt while serving as a company director, you cannot continue in your role. The company will need to make alternate arrangements for the duration of your bankruptcy.
Additionally, any shares you own in the company will vest in your Bankruptcy Trustee. These may be sold for the benefit of creditors.
In certain circumstances, your Bankruptcy Trustee may have the power to sell or liquidate the company in order to repay the personal debts of a bankrupt Director.
For example, if a Director owns 60% of a company’s shares and is bankrupt, the Trustee may need to sell these shares to satisfy creditors. This may involve selling the business as a going concern, or placing it in liquidation to recover as much value from the shares as possible.
Can I Operate a Business While Bankrupt?
You are generally permitted to operate a sole tradership while bankrupt. If you are a sole trader and you become bankrupt, you must fulfil additional obligations:
- The business name must contain your full name. This allows others to search your name on the NPII.
- If the business name doesn’t contain your full name, you must inform people you deal with about your bankruptcy.
You are permitted to operate a partnership while bankrupt. However, one partner’s bankruptcy can affect the personal finances of other partners. Partnership agreements often contain dissolution clauses that dissolve the business if one partner is bankrupt.
The Corporations Act prevents you from acting as the director of a private or public company during the bankruptcy period. You can resume directorship after being discharged from bankruptcy.
Employment Restrictions for Bankrupts
AFSA maintains a comprehensive list of professional licences and members that may be affected by bankruptcy. The table below shows whether bankruptcy has a potential impact or can exclude you from holding certain licences in your state:
| Profession and/or Trade | Location and Impact | |||||||
| QLD | NSW | VIC | ACT | TAS | SA | NT | WA | |
| Accountant (CPA, CA, NIA) | Potential impact. Contact the ICAA, CPA Australia or IPA for details. | |||||||
| Builders Licence | Exclusion | Exclusion | Potential Impact | Exclusion | Potential Impact | Exclusion | Exclusion | Potential Impact |
| Company Director | Exclusion. Contact ASIC for details. | |||||||
| Councillors and Members of Parliament | Exclusion. Contact ALGA for details. | |||||||
| Defence Force | Potential impact for active servicepeople. Potential exclusion for new applicants during the bankruptcy period. Contact Defence Australia for details. | |||||||
| Electrical Licence | Potential impact. Contact your local body for details: QLD | NSW | VIC | ACT | TAS | SA | NT | WA | |||||||
| Escorts and Brothel Managers | Potential Impact | N/A | N/A | Potential Impact | N/A | Potential Impact | Potential Impact | N/A |
| Finance Brokers and Dealers | Exclusion. Contact ASIC for details. | |||||||
| Gaming Employees | Potential impact. Contact your local body for details: QLD | NSW | VIC | ACT | TAS | SA | NT | WA | |||||||
| Gas Fitter Licence | Potential exclusion. Contact your local body for details: QLD | NSW | VIC | ACT | TAS | SA | NT | WA | |||||||
| Investigator Licence | Potential exclusion. Contact your local body for details: QLD | NSW | VIC | ACT | TAS | SA | NT | WA | |||||||
| Justice of the Peace | Exclusion | |||||||
| Motor Vehicle Dealer Licence | Exclusion | Exclusion | Exclusion | Potential Impact | Exclusion | Exclusion | Exclusion | Potential Impact |
| State and Federal Police | Exclusion | |||||||
| Real Estate Licence | Exclusion | Exclusion | Exclusion | Potential Impact | Potential Impact | Exclusion | Potential Impact | Potential Impact |
| Pawnbrokers Licence | Potential Impact | |||||||
| Security Licence | N/A | N/A | Potential Impact | Potential Impact | Potential Impact | Potential Impact | N/A | N/A |
| Solicitors | Potential Impact | |||||||
| Tax Agent | Potential Impact | |||||||
Do I Need to Tell My Employer About My Bankruptcy?
You do not need to disclose your bankruptcy to an employer unless your occupation is on the list of restricted professions. The Australian Financial Security Authority will not inform your employer if you become bankrupt in most circumstances.
Bankruptcy may affect your professional memberships and licences. See the table above for more information.
Talk to SV Partners About Your Obligations in Bankruptcy
Whilst bankruptcy may impact certain professions and licence holders, it generally won’t impact your ability to find and maintain employment. Neither will it impact your ability to earn an income and create savings.
Employment during your bankruptcy can be a complicated topic. If you’re unsure, talk to the team at SV Partners to find out more.
SV Partners are a team of Registered Trustees with vast experience in administering bankruptcy. If you are concerned about your financial position, we can help you investigate your options and decide what to do next.
We provide support throughout the bankruptcy process. We will discuss your obligations and can provide assistance in maintaining your professional licences and registrations.
Contact us to learn more, or book a confidential consultation today.