Insolvency – what is it and why care

Insolvency is an important term in both the business and consumer world. The usual definition of insolvency is that a person or company is insolvent if it is unable to pay its debts as and when they fall due.

That is a simple definition but establishing whether a company or an individual is insolvent is a much more difficult task in practice. In addition, there are a number of legal implications that flow from insolvency. We have discussed those topics in a number of different areas on this website. Here is a summary of the most important issues regarding insolvency and links to where you can find more information.


The first thing you should establish is whether or not you or your company is insolvent. We have created a handy online test at Is My Company Insolvent.

You might also want to have a look at our list of Warning Signs to see whether or not they apply to your company.

If you have established that your company is insolvent then you need to be aware of a number of important legal implications. Firstly, you need to be aware of the Insolvent Trading laws. The basic concept is that if your company is insolvent and you allow it to incur new liabilities after the date of insolvency then you can be personally liable for those debts. As always, that simple concept is a bit more complicated in practice.

A director should also be aware of the number of Directors’ legal duties to creditors and other stakeholders that arise if a company is insolvent.

If you are finding all of this a bit complicated you should Contact Us and we can provide you with specific advice on whether your company is likely to be insolvent and if so what are your options.

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If you would like to learn more about Insolvent trading, please access our full Insolvent trading guide created by Dissolve’s specialists explaining this in detail. We also offer insolvency consultancy services around the country in locations such as Gold CoastSydney, Melbourne, Brisbane, Adelaide, and Perth.

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