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Corporate Insolvency Lawyers — Restructure. Protect Directors. Preserve Value.
When a company faces financial difficulty, directors face a critical decision: continue trading and risk personal liability under the insolvent trading provisions, or trigger an insolvency process. The right choice — and the right process — can preserve the business and protect the directors. A corporate insolvency lawyer advises on voluntary administration, deeds of company arrangement, small business restructuring, and liquidation — and protects directors throughout the process.
⚠ Every day a company continues to trade while insolvent adds to the directors' personal liability exposure. The safe harbour defence requires genuine restructuring activity — not delay. Get advice now. Act immediately.
What We Help With
Corporate restructuring and insolvency — all options considered.
Safe Harbour — Director Protection During Restructuring
The safe harbour (s588GA Corporations Act) protects directors from insolvent trading liability where they take a course of action reasonably likely to lead to a better outcome than immediate administration — and genuinely pursue that course. A lawyer advises on whether the safe harbour is available and helps structure the restructuring activities required to qualify for its protection.
Voluntary Administration — Part 5.3A
Voluntary administration provides a moratorium on creditor claims while an administrator assesses the company's financial position and the options available — including a deed of company arrangement (DOCA) or liquidation. Directors appoint the administrator; the process provides breathing space to develop a restructuring proposal without the pressure of individual creditor enforcement.
Deed of Company Arrangement (DOCA)
A DOCA is an agreement between a company and its creditors — approved at a meeting of creditors — that typically provides for creditors to receive a dividend (often cents in the dollar, paid over time) in exchange for releasing their claims against the company. A successful DOCA allows the company to emerge from administration and continue operating — with a restructured debt position. A lawyer advises on the viability of a DOCA and manages the process.
Small Business Restructuring — Part 5.3B
The small business restructuring process (introduced January 2021) provides a simplified restructuring pathway for companies with total liabilities under $1 million — allowing directors to remain in control during the restructuring process while a restructuring practitioner develops a plan. The process is faster and less expensive than full voluntary administration and preserves management continuity.
Creditors' Voluntary Liquidation
Where a company cannot be viably restructured, an orderly liquidation under the control of a liquidator appointed by the company's creditors distributes the company's assets to creditors in the correct order of priority. A lawyer advises on the liquidation process, assists directors in complying with their obligations to the liquidator, and manages director liability claims arising from the liquidation.
Defending Liquidator Claims Against Directors
Liquidators frequently pursue directors for insolvent trading, uncommercial transactions, unfair preferences (payments to certain creditors shortly before liquidation), and related party transactions. A lawyer defends directors against liquidator claims — identifying available defences (including the safe harbour) and negotiating settlements where the director's exposure is limited.
What the Law Says
Corporate insolvency — the Corporations Act framework.
The insolvency test — when is a company insolvent?
A company is insolvent when it is unable to pay its debts as and when they become due and payable (s95A Corporations Act). The test is a cash flow test — not a balance sheet test. A company with negative net assets can be solvent if it can meet its obligations as they fall due (for example, through ongoing trade, credit facilities, or parent company support). Conversely, a company with positive net assets can be insolvent if it cannot pay its current obligations. Directors should regularly monitor the company's ability to meet its current obligations — not just its net asset position. A lawyer helps directors understand whether the company is approaching insolvency.
Insolvent trading — s588G personal liability
Under s588G of the Corporations Act, a director is personally liable for debts incurred by the company when the company was insolvent (or became insolvent as a result of incurring the debt) and the director had reasonable grounds to suspect insolvency. The director does not need to have known the company was insolvent — reasonable grounds to suspect are sufficient. The liability is for the amount of the debt incurred, not the company's overall deficit. Liquidators can pursue multiple debts — the aggregate exposure can be significant. Directors who act promptly (seeking advice, triggering the safe harbour, or appointing an administrator) limit their exposure.
Unfair preferences — payments to certain creditors
A liquidator can recover payments made to unsecured creditors in the 6 months before the commencement of liquidation (the "relation-back period") where the payments constituted an unfair preference — preferring that creditor over the general body of creditors at a time when the company was insolvent. Common examples include: paying a director's loan account; making payments to a related entity; or paying a supplier who threatened to stop supply ahead of the company's collapse. Directors who cause the company to make such payments expose themselves to personal liability claims and the company to preference recovery actions by the liquidator.
Voluntary administration moratorium — protection for the company
On the appointment of a voluntary administrator, an automatic moratorium on enforcement action by unsecured creditors comes into effect. During voluntary administration, creditors cannot commence or continue legal proceedings against the company, exercise rights of repossession, or enforce securities — without the administrator's consent or a court order. The moratorium provides the administrator and the company with the breathing space to assess the position and develop a restructuring proposal. The moratorium is one of the most powerful aspects of voluntary administration — and it comes into effect immediately on the administrator's appointment.
Priority of creditors in liquidation
In a liquidation, assets are distributed to creditors in a statutory order of priority set out in the Corporations Act. The general order is: secured creditors (to the value of their security); liquidator's costs and expenses; employee entitlements (wages, superannuation, leave entitlements); unsecured creditors (including the ATO, trade creditors, and unsecured loan creditors) on a pari passu (pro-rata) basis. Shareholders receive the remaining assets (if any) after all creditors are paid — in practice, this is rare in an insolvent liquidation. Understanding the priority order is essential for directors considering whether a liquidation will produce a better outcome than a DOCA.
Phoenix activity — ASIC's enforcement focus
Phoenix activity — where directors allow a company to fail and then transfer its business and assets to a new company to avoid paying creditors and employee entitlements — is illegal under the Corporations Act and a specific target of ASIC enforcement. The introduction of Director Identification Numbers (DINs) in 2021 makes it significantly easier for ASIC to track directors across multiple failed companies. Directors who engage in illegal phoenix activity face civil penalties, criminal prosecution, and personal liability. A lawyer advises on the distinction between legal restructuring and illegal phoenix activity.
How It Works
One request. Urgent corporate insolvency advice.
Tell us the company's current financial position, whether it is continuing to incur debts, and what restructuring options you have considered. A corporate insolvency lawyer contacts you for an urgent free consultation.
Submit Your RequestDescribe the financial position
Tell us: the company's total liabilities; whether it is currently meeting its obligations as they fall due; the main creditors; whether there is any restructuring plan in development; and the directors' current position.
Matched to a corporate insolvency specialist
Your request is matched to a commercial lawyer experienced in corporate insolvency — including the safe harbour defence, voluntary administration, DOCAs, and defending liquidator claims against directors.
Restructuring pathway identified and implemented
A lawyer assesses the available options, advises on the most appropriate process, and manages the restructuring or insolvency — protecting directors and maximising the outcome for creditors and stakeholders.
Common Questions
Corporate insolvency — frequently asked questions.
What's the difference between voluntary administration and liquidation?
Voluntary administration is a restructuring process — the company continues to operate (under the control of the administrator) while the administrator assesses the position and develops a proposal for creditors (typically a DOCA). The objective is to find a better outcome for creditors than an immediate winding up. Liquidation is a terminal process — the company ceases trading, all assets are collected and sold, creditors are paid in the order of priority, and the company is wound up and de-registered. Voluntary administration is appropriate where there is a viable business or a realistic prospect of a DOCA that creditors will accept. Liquidation is appropriate where there is no viable restructuring option. A lawyer advises on which process is appropriate for the specific situation.
Can I use the safe harbour if my company is already being sued by a creditor?
Yes — the safe harbour can be entered at any time before a liquidator is appointed, including where there is existing litigation. However, the safe harbour requires genuine restructuring activity — a course of action that is, at the time it is taken, reasonably likely to lead to a better outcome for the company than immediate administration or liquidation. The existence of creditor litigation does not disqualify the safe harbour — but it does create urgency, because a creditor with judgment can take enforcement action and a statutory demand can trigger winding-up proceedings. A lawyer advises on whether the safe harbour is available and how to structure the restructuring activities to maintain its protection.
I resigned as a director before the company went into liquidation — am I still liable?
Possibly — resignation does not automatically prevent director liability. Under s588G, a director is liable for debts incurred while they were a director and the company was (or should have been suspected to be) insolvent. The relevant period is the period during which you were a director — not the period after resignation. If debts were incurred during your directorship while the company was insolvent, you may have personal liability for those debts even after resignation. Resignation may also be challenged if it was designed to avoid liability while the director remained involved in managing the company (shadow director). A lawyer assesses your specific period of directorship and the company's financial position during that period.