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If your business is spiraling under debt with an imminent risk of insolvency, liquidation or
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Insolvency and liquidation are not the same, but they are connected. Insolvency refers to a situation where a company or an individual is unable to meet financial obligations. Liquidation, however, is a potential strategy to deal with insolvency, and involves converting a company’s assets into cash to repay creditors. It’s a means of orderly winding down the company’s operations.
Insolvency procedures in Australia include liquidation, voluntary administration, and receivership for companies, and bankruptcy for individuals. Additionally, there are debt agreements and personal insolvency agreements for individuals seeking alternatives to bankruptcy.
The initial steps in addressing insolvency involve consulting with an insolvency professional or lawyer to understand available options. This professional advice can guide the debtor towards the most appropriate resolution, such as voluntary administration, liquidation, or receivership for companies, or bankruptcy for individuals.
The expenses of insolvency proceedings are generally covered by the assets of the debtor, be it an individual or company. If the assets are insufficient, the insolvency practitioner may not receive full payment for their services. Sometimes, creditors may agree to contribute towards the cost, viewing it as a necessary step towards recovering their owed money.
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