Dictionary

An action or declaration which, if not carried through, can be used by a Creditor to apply to the Court to make a person Bankrupt.

A transaction that has taken place prior to a Personal Insolvency Agreement or bankruptcy that can be recovered or clawed back by the Trustee. They include transactions where less than market value has been paid for an asset in consideration of a transfer in ownership or a transfer has been made to defeat right of access by creditors or preferential payments are made to specific Creditor. A Trustee has the ability to recover the asset or difference in purchase price paid. Certain time limits apply to these transactions.

A court order providing for a party to enter another party’s premises and search for, inspect, take copies and remove specified materials. Such an order is obtained where it is believed a party may frustrate trial process by destroying or removing evidence. As with an application for a Mareva Injunction, an application to the court for an Anton Piller Order is almost always made ex-parte in order to maintain secrecy.

Australian Restructuring Insolvency & Turnaround Association, which is the leading professional organisation in Australia for external administrators/insolvency practitioners. The website is www.arita.com.au/

Anything a person owns before going bankrupt, or buys or receives during bankruptcy. Assets can be divided into two types ñ Divisible Assets and Exempt Assets.

A person against whose estate a sequestration order has been made or who has become a bankrupt by virtue of the presentation of a debtor’s petition.

A process where people, who cannot pay their debts become bankrupt to receive the protection of the Bankruptcy Act and their estate is administered by a Trustee. It allows for the fair distribution of property among creditors and the prosecution of dishonest debtors.

The Commonwealth legislation which covers bankruptcy, Part IX (Debts Agreements), and Part X (Personal Insolvency Agreements) arrangements. It deals with individuals not corporate entities, which are covered by the Corporations Act administered by the Australian Securities and Investments Commission.

A formal, final demand for payment of a debt by a creditor owed at least $5,000 on one or more final judgments or final orders. This notice is issued by the Official Receiver through the office of ITSA. Failure to pay within 21 days is an act of bankruptcy.

Refers to the process where all financial, structural and strategic aspects of a company in financial distress are analysed so as to devise and execute a plan of corporate financial renewal or recovery tailored to the business’s particular circumstances in order to return it to financial solvency, profitability and strategic viability.

The Company Auditors and Liquidators Disciplinary Board—the body that disciplines external administrators.

A form of security for a debt taken by a creditor over company assets. A mortgage is a type of charge.

A small group of creditors, or their representatives, often appointed by the creditors of a company at the first meeting in a voluntary administration. The committee’s role is to consult with the voluntary administrator and to receive and consider reports by the voluntary administrator. The committee may be called upon to approve the voluntary administrator’s fees. The voluntary administrator must report to the committee when it reasonably requires.

A small group of not more than 5 and not less than 3 creditors and shareholders, or their representatives, often appointed by the creditors and shareholders of a company in liquidation to assist the liquidator. The committee is often called on to approve the liquidator’s fees and sometimes to approve the compromise of debts or the entry into contracts extending beyond three months by the liquidator. A Committee is generally formed in more complex administrations and where there are a substantial number of Creditors.

Agree to accept a lesser sum in full payment of a debt.

An asset that might arise if a certain event occurs (e.g. a current legal action being taken by a company might result in an asset if the company wins the case).

A liability that might arise if a certain event occurs (e.g. a current legal action against a company might result in a liability if the company loses the case).

A shareholder who may be liable to contribute towards a company’s debts in a liquidation if their shares are not fully paid.

A person appointed by a secured creditor to deal with assets subject to a charge. Includes a receiver, and receiver and manager.

Controlling Trustee

[read_more id="1" more="Define" less="Hide"]A person who is a private bankruptcy Trustee, ITSA or an eligible Solicitor who investigates a debtor’s financial affairs and calls a meeting of the Debtor’s Creditors under Part X of the Bankruptcy Act.

In the context of bankruptcy, the Court usually refers to the Federal Court of Australia or the Federal Magistrates Court of Australia. Both of these Courts can hear matters associated with personal insolvency.

A liquidation that starts as a result of a court order, made after an application to the court, usually by a creditor of the company.

An entity (person, corporation) to whom money is owed.

A means by which a creditor makes an application to the Court to make a Debtor bankrupt.

A separate legal arrangement set up to deal with creditor claims. Creditor claims can be transferred to a creditors’ trust as part of a deed of company arrangement.

A liquidation for insolvent companies, initiated by the company. Creditors may replace the liquidator appointed by the company in this type of liquidation.

Amounts periodically adjusted in accordance with the Consumer Price Index. Some are adjusted every quarter, others every six months. As an example they identify the value of assets that can be retained by a Bankrupt or the income a Bankrupt can retain before they are required by law to contribute towards their bankruptcy. The current amounts can be found at www.itsa.gov.au

A document acknowledging that a company undertakes to repay a sum of money lent to the company by the holder of the document.

An amount owed.

A person who owes a debt to a Creditor.

A petition presented by a Debtor against himself or herself and includes a petition presented against a partnership pursuant to section 56A and a petition presented by Debtors against themselves pursuant to Section 57.

A declaration that must be provided to creditors by a voluntary administrator informing them about any indemnities given to the voluntary administrator to cover fees or other debts incurred in acting as voluntary administrator of the company. The declaration provides information to enable creditors to make an informed decision about whether they wish to replace the administrator over concerns about independence.

A declaration that must be provided by a voluntary administrator or a liquidator in a creditors’ voluntary liquidation informing creditors about certain relationships. The declaration provides information to enable creditors to make an informed decision about whether they wish to replace the administrator over concerns about independence.

The external administrator appointed to oversee a deed of company arrangement.

A binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with, which may be agreed to as a result of the company entering voluntary administration. Aims to maximise the chances of the company, or as much as possible of its business, continuing, or to provide a better return for creditors than an immediate winding up of the company, or both.

A natural person appointed as a director of a company who is then responsible for directing and managing the affairs of a company. Also includes a shadow director.

The date that the Bankrupt is discharged from bankruptcy.

A share of the profit of a solvent company paid to shareholders. Also used to describe a sum paid to creditors out of the assets of an insolvent company.

Assets/property which vest in the Trustee and can be legally sold by the Trustee.

The period of the bankruptcy, which ends three years from when a person files their Statement of Affairs with ITSA. The duration of bankruptcy can be longer if a Bankrupt does not lodge a Statement of Affairs or if an objection is lodged to extend the bankruptcy.

A creditor (including the Australian Taxation Office in respect of the superannuation guarantee charge) who, in a winding up of a company, would normally be paid their employment-related entitlements in priority to other unsecured debts. These creditors are given a special right to vote on a deed of company arrangement proposal that seeks to modify their priority.

A creditor who is entitled to have a say in a pooling determination made by a liquidator. The term generally covers the external unsecured creditors of the group, but excludes debts owing between companies in the pooled group. A pooling determination relates to a decision to treat the affairs of a group of companies as if it were a single external administration.

Means a court proceeding brought by a party without the knowledge of or in the presence of other parties.

An employee who has also been a director of the company, or a relative of a director, at any time in the 12 months before the appointment of an external administrator. Excluded employees are entitled to only limited priority for repayment of their outstanding entitlements.

Assets/property which cannot be sold in bankruptcy by the Trustee. These are identified in s116 of the Bankruptcy Act.

If a Bankrupt fails to co-operate with their Trustee, or fails to meet the requirements of the Bankruptcy Act, their bankruptcy can be extended (generally by an additional 2 or 5 years, depending upon the circumstances).

A general term for an external person formally appointed to a company or its property. Includes provisional liquidator, liquidator, voluntary administrator, deed administrator, controller, receiver, and receiver and manager. Other than a liquidator for a members’ voluntary liquidation and a controller who is not a receiver or receiver and manager, an external administrator is required to be registered by ASIC. An external administrator is sometimes also referred to as an insolvency practitioner.

The Fair Entitlements Guarantee – a basic payment scheme to assist employees who have lost their jobs as a result of their employer’s liquidation or bankruptcy, and are owed certain employee entitlements.

A charge taken by a lender over particular assets of a company. The company may not dispose of these assets without the consent of the lender.

A charge taken by a lender over general assets of a company. The company is usually able to use and dispose of these assets (e.g. stock, debtors) in the ordinary course of business without the secured creditor’s consent. A floating charge converts to a fixed charge over those assets if certain events listed in the charge document occur. These usually include the appointment of a liquidator or other external administrator.

Refers to the specialised branch of accounting which integrates accounting, auditing, and investigative skills so as to analyse, interpret, summarise and present complex financial and business related issues in a manner which is both understandable and properly supported and that, if required, can be presented in a court of law.

Items that a bankrupt is able to retain when they become bankrupt. A list of items can be found in Bankruptcy Regulation 6.03.

A sum of money that a Bankrupt is required to pay to their Trustee from their income. It is normally called a compulsory income contribution and is based on a statute based formula.

An agreement between the external administrator and a third party to cover the fees and other debts incurred by the external administrator.

Unable to pay all debts when they fall due for payment.

An asset with no identifiable physical form (e.g. a contractual right, copyrights, patents and goodwill).

A charge to be remitted to the Commonwealth (through ITSA) as the governing bankruptcy body. It is all net interest received on funds held in financial institutions for the bankruptcy, that is, interest received less bank charges.

A legal obligation to pay a person.

The orderly winding up of a company’s affairs. It involves realising the company’s assets, cessation or sale of its operations, distributing the proceeds of realisation among its creditors and distributing any surplus among its shareholders. The three types of liquidation are: court, creditors’ voluntary and members’ voluntary.

Refers to the provision of specialised accounting assistance to legal counsel in order to provide or explain accounting knowledge in a legal context.

Also known as a “freezing order” or “asset protection order” is a court order providing for the freezing of a defendant’s assets in order to prevent them from being disposed of or moved outside the jurisdiction of the court. The application for a Mareva Injunction is almost always made ex-partei to a judge in order to maintain secrecy. It is often accompanied by an order that provides for a party to provide documents or other information such that an allegation can be proven.

A shareholder.

A bankrupt may retain vehicles (cars, motorbikes, etc) used primarily as a means transport up to this limit. The amount refers to the equity in the vehicle/s (the value of the vehicles less the sum owing under finance). The current limit is set out at www.itsa.gov.au

National Personal Insolvency Index. It is a computerised database of all personal insolvencies in Australia, both past and present.

The period of bankruptcy can be extended by a Trustee in certain circumstances, which are set out in the Bankruptcy Act. When this occurs, the Trustee lodges an Objection with the Official Receiver at ITSA. Once it is registered on the NPII, it is a valid objection. A Trustee can lodge an objection on a number of grounds, including if a bankrupt fails to co-corporate, or fails to meet the requirements of the Bankruptcy Act. In this instance, a bankruptcy can be extended to a 5 or 8 year period from the date the bankrupt files their Statement of Affairs with ITSA. An objection is not a punitive measure and is only to be used to assist in making a Bankrupt comply with their duties. A Bankrupt has the right to appeal the lodgment of an objection to discharge.

A person who administers statutory functions under the Bankruptcy Act for the government/ITSA. The functions performed are different to a Trustee.

A natural person or a company.

In accordance with the PERSONAL PROPERTY SECURITIES ACT 2009 – SECT 10 “personal property” means property (including a licence) other than: (a) land; or (b) a right, entitlement or authority that is: (i)granted by or under a law of the Commonwealth, a State or a Territory; and (ii)declared by that law not to be personal property for the purposes of this Act. Note:This Act does not apply to certain interests even if they are interests in personal property (see section 8)

A voting procedure where both the number of creditors voting a particular way and the value of their debts is considered in deciding if a resolution is approved or not.

The practice of treating the affairs of a group of companies as if it were a single external administration.

Provisions that the Corporations Act 2001 takes to be included in a deed of company arrangement, unless the deed specifically excludes them.

The order set down by the Corporations Act 2001 for the payment of unsecured creditors of an insolvent company by an external administrator.

An unsecured creditor entitled to be paid ahead of other creditors (e.g. employees).

A prescribed form to be completed by creditors at the liquidator’s request, setting out details of their claim against the company, including how the debt arose and the amount claimed.

Means real or personal property of any description.

A debt or liability that is provable in the bankruptcy. This includes all debts and liabilities, present or future, certain or contingent, to which a Bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy.

A liquidator appointed by the court to preserve a company’s assets until a winding-up application is decided.

A person appointed by another person to represent them at a meeting. A proxy is usually entitled to attend and vote on behalf of the person who appointed them. In an external administration, the appointer is usually a creditor or shareholder.

A prescribed form that must be completed by creditors or shareholders to appoint a proxy for a creditors’ or shareholders’ meeting.

A liquidator, voluntary administrator, deed administrator, ASIC or a person authorised by ASIC to do so can apply to the court to question an externally administered company’s directors or any other person who may be able to give information about the affairs of the company.

A charge to be remitted to the Commonwealth (through ITSA) as the governing bankruptcy body. This is calculated at 4 % (currently) of gross funds received by the Trustees, less certain payments (secured creditor payments, trading payments).

Convert assets into cash, often by selling them.

An external administrator appointed by a secured creditor to realise enough of the assets subject to the charge to repay the secured debt. Less commonly, a receiver may also be appointed by a court to protect the company’s assets or to carry out specific tasks.

A receiver who has, under the terms of their appointment, the power to manage the company’s affairs.

An insolvency procedure where a receiver, or receiver and manager, is appointed over some or all of the company’s assets.

A person who is registered with ITSA to be a trustee of bankrupt estates and Part X arrangements.

Section 50 of The Corporation Act; where a body corporate is: (a) a holding company of another body corporate; or (b) a subsidiary of another body corporate; or (c) a subsidiary of a holding company of another body corporate; the first-mentioned body and the other body are related to each other.

A prescribed form required to be completed by the directors and secretary of a company in liquidation or receivership, giving details of the company’s assets and liabilities, and the identities of the creditors and debtors.

A resolution passed by a majority in value of the Creditors present personally, by telephone, by attorney or by proxy at a meeting of Creditors and voting on the resolution.

A creditor who has a security (e.g. charge or mortgage) over some or all of a company’s property.

The PERSONAL PROPERTY SECURITIES ACT 2009 – SECT 12 defines security interests: (1) A security interest means an interest in personal property provided for by a transaction that, in substance, secures payment or performance of an obligation (without regard to the form of the transaction or the identity of the person who has title to the property). Note:For the application of this Act to interests, see section 8. (2) For example, a security interest includes an interest in personal property provided by any of the following transactions, if the transaction, in substance, secures payment or performance of an obligation: (a) a fixed charge; (b) a floating charge; (c) a chattel mortgage; (d) a conditional sale agreement (including an agreement to sell subject to retention of title); (e) a hire purchase agreement; (f) a pledge; (g) a trust receipt; (h) a consignment (whether or not a commercial consignment); (i) a lease of goods (whether or not a PPS lease); (j) an assignment; (k) a transfer of title; (l) a flawed asset arrangement. (3) A security interest also includes the following interests, whether or not the transaction concerned, in substance, secures payment or performance of an obligation: (a) the interest of a transferee under a transfer of an account or chattel paper; (b) the interest of a consignor who delivers goods to a consignee under a commercial consignment; (c) the interest of a lessor or bailor of goods under a PPS lease. (3A) A person who owes payment or performance of an obligation to another person may take a security interest in the other person’s right to require the payment or the performance of the obligation. (4) Without limiting subsection (3A): (a) an account debtor, in relation to an account or chattel paper, may take a security interest in the account or chattel paper; and (b) an ADI may take a security interest in an ADI account that is kept with the ADI. (5) A security interest does not include: (a) a licence; or (b) an interest of a kind prescribed by the regulations for the purposes of this section. (6) A security interest is not created only by an agreement or undertaking to do either of the following: (a) to postpone or subordinate a person’s right to payment or performance of all or any part of a debtor’s obligation to another person’s right to payment or performance of all or any part of another of the debtor’s obligations; (b) to postpone or subordinate all or any part of a secured party’s rights under a security agreement to all or any part of another secured party’s rights under another security agreement with the same grantor.

An order made by the Court making a person bankrupt based on a Creditor’s Petition or other application as outlined under the Act.

A natural person not on the public register as a director of a company but who directs and manages the company’s affairs and is taken by the Corporations Act 2001 to be a director.

A resolution passed by a majority in number and at least three-fourths in value of the Creditors present personally, by telephone, by attorney or by proxy at a meeting of Creditors and voting on the resolution.

A document that must be filed in Bankruptcy, which sets forth answers to questions concerning the debtor’s past and present financial situation.

An asset with a physical form (e.g. stock or real estate).

This is a person who administers a bankruptcy or Part X administration. It is either a private bankruptcy Trustee or the Official Trustee in Bankruptcy (ITSA).

A transaction that was unreasonable for a company to have entered into. It may be able to be set aside by the company’s liquidator provided it occurred within 2 years prior to the winding up, and when the company was insolvent or if the company became insolvent by entering into the transaction.

A payment made or other benefit given to a creditor by an insolvent company which causes that creditor to be in a more favourable position than other unsecured creditors in a liquidation. The company’s liquidator can seek to recover an unfair preference provided it occurred within 6 months prior to the liquidation, and when the company was insolvent or if the company became insolvent by making the payment or giving the benefit.

A creditor who does not hold a security over a company’s property.

An insolvency procedure where the directors of a financially troubled company or a secured creditor with a charge over most of the company’s assets appoint an external administrator called a ‘voluntary administrator’. The role of the voluntary administrator is to investigate the company’s affairs, to report to creditors and to recommend to creditors whether the company should enter into a deed of company arrangement, go into liquidation or be returned to the directors.

An external administrator appointed to carry out the voluntary administration of a company.

A court order for the winding up of a company. The first step in a court liquidation. Usually made after an application by a creditor.