Saturday, Dec 07, 2013 at 21:44
Fred, the insolvency notice is merely a petition from a disgruntled creditor of the company. These notices are not an indication that a company is actually insolvent - they just mean some creditor hasn't been paid, and is sick of waiting, and is trying to force the issue.
Quite often, insolvency notices are used as a threat to get some action, they are not necessarily followed through - and in a large number of cases, the debtor company makes some arrangement with the creditor, or acquires additional funding, and pays out the debt, or makes arrangements to pay it out over time. In these cases, the insolvency action is dropped and the debtor company continues to trade.
If the insolvency notice is not met with a firm proposal for paying the aggrieved creditor - or if evidence can't be produced that indicates the company is solvent - then the court can either appoint a liquidator to take over the companies assets - or it can place the company in voluntary administration.
If a liquidator is appointed, the liquidator then assesses the companys liabilities and assets and draws up a plan to dispose of what assets can be realised and outlines the return to creditors.
If a company is placed in voluntary administration, then the directors of the company proceed with drawing up a Deed of Company Arrangement (DOCA) which outlines how the company can keep trading and meet its liabilities.
If the DOCA is accepted at a creditors meeting, then the company proceeds to continue in business while it pays off its accumulated debts.
If the DOCA is rejected, then a liquidator is appointed, and the company is usually wound up.
I cannot find any evidence of a liquidator being appointed to Cgear, or evidence of a voluntary administration being entered into by them - however, this may still be playing out, as the directors struggle to keep control of the company, find additional funding, or make agreements with creditors, without entering into VA.
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Follow Up By: fredwho - Saturday, Dec 07, 2013 at 21:54
Saturday, Dec 07, 2013 at 21:54
Thanks very much Ron N. It doesn't look too good CGear taken to the Victorian Supreme Court though. I assume there must be a lot of $ involved.
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Follow Up By: Ron N - Saturday, Dec 07, 2013 at 22:02
Saturday, Dec 07, 2013 at 22:02
Yes, once over a certain amount (this varies between States), the issue has to go to the Supreme Court.
The amount usually has to be around $100,000 - $150,000 before it's moved to the Supreme Court.
Some of these companies turn over a lot of money, they can have a turnover of several million dollars annually, if they are running a low profit margin business. That means they can easily run up a debt of many hundreds of thousands of dollars with just a few creditors.
This is what worries a lot of creditors, it can all turn pretty bad within a short space of time - and sometimes fraud is involved, which makes things a lot worse.
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