Business Law: Insolvency, Consumer Law and Business Structures

Description

Description: This course delves into the law relating to directors and management, members’ rights and applies it to the winding up of a company.

Background: Insolvency can be defined as the inability to pay one's debts as they fall due. Generally, insolvency terms refers to the inability for a company to pay off its debts.

In Australia, insolvency litigation is about 50% of all litigation involving companies. This area of law is therefore of vital importance academically and in accounting, legal and banking practice.
The Corporations Act 2001 contains detailed provisions relating to insolvent trading. Where transactions occurred prior to 23 June 1993, the applicable provisions are contained in ss 592, 593 and 589. Where transactions occur on and after 23 June 1993, Part 5.7B contains the relevant provisions.
Insolvency is not a substitute for bankruptcy.

What Is Bankruptcy?
In Australia, the term bankruptcy is used in relation to an individual person, rather than a company. Bankruptcy is the approach by which the normal rights of a creditor are withheld in the interests of the debtor and by which the law of debt is modified to affect a compromise beneficial to all parties.

The Bankruptcy Act may be divided into two parts:
• where provision is made for the conversion of the status of a debtor into that of a bankrupt; and
• where the status of the debtor is preserved as such, with provision being made for agreements between the debtor and their creditors without the debtor being made a bankrupt.

When a person is bankrupt, they may be limited in their ability to enter into contracts. The general position is that a bankrupt is automatically discharged from bankruptcy after three years from the date on which the bankrupt filed his/her statement of affairs. The discharge releases the bankrupt from all provable debts (including secured debts) except those stated in s 153 of the Act.