Trading While Insolvent in Australia

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It is not uncommon for business owners to have made significant improvements to their business and its profitability unfortunately for it to be too little, too late. Usually, all attempts to turnaround and improve the viability of a business have been exhausted and the business owners themselves are running out of steam and cash to keep on going, succumbing to the mounting pressures of debt.

But does a formal insolvency appointment always spell the end for a business?

A formal insolvency appointment (e.g. voluntary administration, liquidation and bankruptcy) does not always mean the end for a business. Sometimes a formal appointment creates interest and opportunity for a business to continue with a view to it being sold; and if that occurs, more often than not, it results in a better outcome for all stakeholders.

Whilst an external administrator (e.g. receiver, voluntary administrator, liquidator, controlling trustee and bankruptcy trustee) is able to trade a business during an appointment, it is often practical and commercial limitations that stop a business from trading, such as the loss of key staff, clients, contracts, licences, supplier issues or insufficient funds being available to continue trading.

The Small Business Restructuring process (introduced in 2021) also allows the ongoing trading of a business; however, directors and management remain in control of the company and its business under the supervision of a restructuring practitioner.

Some of the main advantages and benefits that may be gained from trading and selling a business during an insolvency appointment include:

  • Continuation of employment for staff and as a result, less employee entitlements being owed (particularly redundancy payments).
  • Preservation and realisation of intangible assets which may not have been sold if the business did not continue (e.g. business name, contact numbers, customer list, goodwill / branding, trademarks, patents, etc).
  • A lower amount of debt being owed to creditors – particularly with respect to contractual obligations under leases, finance agreements and other third-party contracts being taken over by another party.
  • Usually, a higher sale price being obtained for the Business’ assets, including physical / tangible assets – the whole is worth greater than the sum of its parts ~ Aristotle.
  • As a result of the higher sale price, more funds being available to pay creditors – including secured creditors, employee entitlements (priority creditors) and unsecured creditors

Trading a business during an insolvency appointment comes with its own unique challenges and requires specialist knowledge and skills and the cooperation of key stakeholders. Sometimes though, it can be well worth it.

SV Partners has extensive experience trading businesses during insolvency appointments and a track record of achieving high quality results when the right situation presents itself across a variety of industries:

If you or your client’s business is facing financial difficulty, contact your local SV Partners’ office today to discuss whether trading on a business during an insolvency appointment is the right option. It may be the case there is some hope for the business to continue, even if a formal appointment needs to occur urgently.


Article written by Daniel Luckman (Senior Manager) – Sunshine Coast[/vc_column_text][vc_empty_space height=”50px”][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column width=”2/3″][social_share_list][/vc_column][vc_column width=”1/3″][vc_column_text][likebtn theme=”drop” dislike_enabled=”0″ icon_dislike_show=”0″ ef_voting=”bounce” tooltip_like_show_always=”1″ bp_notify=”0″][/vc_column_text][/vc_column][/vc_row][vc_row css_animation=”” row_type=”row” use_row_as_full_screen_section=”no” type=”full_width” angled_section=”no” text_align=”left” background_image_as_pattern=”without_pattern”][vc_column][templatera id=”478″][/vc_column][/vc_row]

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