If you cannot afford to pay your debts, the law provides two options in order to get back in control of your finances:
- You can declare bankruptcy under the provisions of the Bankruptcy Act 1966; or
- You can enter into a ‘personal insolvency agreement’ with their creditors under the provisions of Part X of the Bankruptcy Act.
However, if you are a director of a company entering into bankruptcy or a personal insolvency agreement can have dire consequences.
What happens to me if I am bankrupt or subject to a personal insolvency agreement?
Unless you have been granted special leave by the court, Section 206B of the Corporations Act 2001 (Cth) states that you will be automatically disqualified from managing companies or being a director, alternate director or secretary of a company for the duration of the bankruptcy or personal insolvency agreement.
In fact, it is an offence for a person who has been disqualified due to being bankrupt or subject to a personal insolvency agreement continues to manage a corporation. If convicted, you could be fined, or face imprisonment, or both.
When can I be a director, alternate director or secretary again?
You can resume your duties as a director, alternate director or secretary again:
- If you are discharged from your bankruptcy; or
- If you have fully complied with all of the terms of the relevant personal insolvency agreement.
If this happens to me, what do I need to do?
If you have general questions about whether you are bankrupt or have entered into a personal insolvency agreement, you can contact the Australian Financial Security Authority.
There are certain forms that you may have to fill out depending on your individual circumstances, and AFSA can provide you with this general information.
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