An Introduction To Insolvency Law - Part One

1. Introduction

'Insolvency' is defined as the absence of solvency. Solvency, in turn, is defined as the ability of an entity to pay all of its debts as and when they fall due.¹

In Australia, laws relating to insolvency are governed by the Corporations Act 2001 (Cth) (Corporations Act).

The overarching aim of insolvency law is to balance the interests of debtors, creditors and the general community when matters of insolvency arise. In particular, the insolvency regime seeks to provide:

• an equal, fair and orderly procedure by which to handle the affairs of insolvent companies (insolvents), ensuring an equal and equitable distribution of the assets amongst creditors;
• procedures to ensure debts are satisfied with as little delay and expense as possible;