Insolvency litigation and recovery action

Disputes with liquidators, regulators and other stakeholders can be expensive and lengthy, and expose a director to personal liability.

Understand your obligations and protect your interests by engaging a legal advisor who can identify the exposure of your personal assets, advise on your potential liability, and reduce the length, complexity, and publicity of legal action.

An experienced insolvency legal specialist understands the steps required to resolve disputes, and can assist you to defend or reach a negotiated outcome with key stakeholders.

Learn more below about the process of insolvency litigation and recovery action, and your rights and obligations as a director.

Unfair preference claims

When a company pays a creditor shortly before liquidation, that creditor may have received an unfair preference. A liquidator can recover an unfair preference from a creditor. Whether an unfair preference claim exists depends on the facts, timing and nature of the payment, and the creditor's security (if any).


If a payment to a creditor is made shortly before winding up, a liquidator may seek to determine if the creditor was advantaged at the expense of other creditors or shareholders. In doing so, the liquidator would seek to understand if the creditor was aware the company was insolvent, and if the creditor received more for the payment of its debt than it would have after the winding up of the insolvent company.

Unfair preference claims can be defended or commercially resolved with the right legal advice. An insolvency lawyer will explore defences to unfair preferences, enabling you to deal with the liquidator and its lawyers.

Recovery actions

A liquidator's primary role is to identify, gather, and dispose of a company's assets for the benefit of the creditors. To maximise the benefit to creditors, a liquidator will explore a range of recovery actions.

Voidable transactions

A liquidator will examine the validity of transactions and determine whether any are voidable, and therefore can be reversed to expand the assets available to creditors.

Uncommercial transactions

An uncommercial transaction is deemed to be one a reasonable person would not have made if they were in the company's circumstances.

When assessing whether a transaction is uncommercial, a liquidator will consider the benefits and detriments to the company. If the company was insolvent at the time of the transaction, the transaction may be declared void, and the benefit recovered by the liquidator.


A business asset transaction may be deemed uncommercial where the assets are sold below market value. A liquidator's powers enable it to catch a wide variety of transactions, including where assets are offloaded to an associated third party as part of a "phoenix" arrangement.

An insolvency lawyer can assess whether a proposed transaction may be deemed uncommercial and provide directors with advice on how the transaction can best progress without being challenged as voidable later.

Liquidator's examinations

Liquidators can apply to the court to conduct a public examination of the directors and officers of a company, and others who have taken part in the management of its affairs. Within this forum, the liquidator can publicly ask questions in the investigation of the company's business, property, and affairs.

The purpose of a public examination is to assist the liquidator to investigate potential causes of action and identify recoverable assets. An insolvency legal expert can help directors and officers in managing the examination process, including with the production of documents, legal professional privilege issues and protecting directors and officers against exposing themselves to penalties.