Join our mailing list to stay informed!
Posted by Revive Financial on Apr 20, 2016 12:00:00 AM

For all companies operating in our unstable modern economic landscape, it is vital to understand the differences between bankruptcy, liquidation and administration.

We’ve created this article to help guide you through each of these commonly misunderstood concepts so you can better comprehend what each one entails – before making any financial decisions.

Let’s start by examining what it means for a company to be placed into administration.

1. Administration

When the directors of a company come to the conclusion that they are insolvent, or will likely become insolvent in the near future, they will be considered to have gone into administration.

What happens in this case, is that an external representative of the company – a registered liquidator – will be put in place to manage it. The duration of the administration depends on how long the company needs to determine their financial future.

Administrators can be appointed by the following representatives:

  • Secured creditors
  • Liquidators
  • Provisional liquidators; or,
  • Company directors

The responsibilities of the administrator include:

  • Reporting offences to ASIC,
  • Required to take control of the financial assets of the company
  • Inquiries into the affairs of the company
  • Organisation of creditor meetings to determine whether or not the company should be liquidated; and,
  • Communication with directors to ensure a Deed of Company Arrangement is created

After the company has been placed into administration, the creditors will have three option to consider. They can either accept the Deed of Company Arrangement proposal (and control can be given back to the directors), in which case the company can continue operating – or they can be liquidated.

2. Liquidation

Generally, there are two types of liquidation – voluntary and involuntary. With both variations, assets are sold and the money is used for repaying creditors to pay off as much of the outstanding debt as possible.

After this first step, it is followed by a dissolution of the company’s assets and finally the company is closed. What this means is that regardless of whether the company is voluntarily or involuntarily liquidated – the result is generally the same (the company no longer exists after liquidation).

One important aspect of liquidation to remember is that it only applies to companies. If you’re an individual seeking liquidation, you may want to read on to learn about bankruptcy.


3. Bankruptcy

When you become bankrupt you’re declaring that you cannot pay any of your debts. Debt collectors will not only stop contacting you, but you will be considered bankrupt for a duration of three years – and should only be thought of as a last resort.

There are generally two ways in which you can be considered bankrupt. The first is when you voluntarily file for bankruptcy yourself. The second involves your creditors – the people or companies you owe money to – who will file for bankruptcy on your behalf.

Keep in mind that your bankruptcy is kept recorded for up to seven years (see, the National Personal Insolvency Index), on your credit report.

While you may be able to keep some assets, such as personal belongings, your income is likely to become reduced over a certain period of time depending on how much money you owe.

Bankruptcy and liquidation, even if they seem like the only option, should always be considered a last resort. It is advisable to seek as much advice as you can before making such a decision, and take the time to understand what options you have available.

Complete our Instant Online Assessment to learn about your options. Alternatively, speak to one of the team now on 1800 861 247 or via our contact form. Also, if your business uses XERO for its accounting, you can receive an instant score and suggested actions based on your personal situation, using our online Business Viability Tool.

Topics: Bankruptcy, Company Liquidation, Voluntary Administration, Business Debt, Liquidation

How Can We Assist You Today?

Personal Debt Icon Personal
Business Debt Icon Business
Please select an assistance option to continue.

Types Of Unsecured Debts

Credit Card Icon Credit/Store Cards
Personal Loan Icon Personal Loan
Pay Day Loan Icon Pay Day Loan
Tax Debt Icon Tax Debt
Disconnected Utilities Icon Utility Bill
Other Debts Icon Other
Please select at least one type of unsecured debt.

Your Business Structure

Sole Trader Icon Sole Trader
Partnership Icon Partnership
Company Icon Pty Ltd Company
Tax Debt Icon Trust
Please select at business structure to continue.

Unsecured Debt Amount


Business Debt Amount


Take Back Control Today!

First Name

Last Name


Phone Number

Phone number must be 10-digits long and begin with a 0. (e.g. 04 1234 5678)

Post Code

Post code must be 4-digits long (e.g. 4567)

Some of your details appear incorrect.
Please update the highlighted fields and re-submit.


You’ve taken the first step to steer your business back to viability

Let’s keep the momentum going, take the second step by linking your Xero account now.


You've taken the first step to becoming debt free

Let's keep the momentum going, take the second step now and complete the assessment form.

By submitting this form you acknowledge that you have read and accept our Privacy Policy