The respective complexities of corporate and personal insolvency

A question on notice of 1 March 2023 was asked by the chair of the Parliamentary Joint Committee on Corporate Insolvency in relation to what was referred to as an “implied difference” between personal and corporate insolvency – that there is a lot more money in corporate insolvency and that it is the more complex – “the embedded subtext all of the time”. 

However, the chair suggested that the complexity of much of corporate insolvency is pretty similar to what is happening in personal bankruptcy in terms of level of debt,

“but is caught up in an entirely different system without any access to a government-run liquidator”.

The response from Treasury of 22 March 2023 partly answered the question in that it showed that less than 10 per cent of corporate insolvencies involved estimated liabilities of under $50,000 and over 70 per cent involved estimated liabilities in the $100,001 to $5 million range. In comparison, 52.7 per cent of people who entered into personal insolvency during 2021-22 had less than $50,000 in liabilities.[1]

Treasury is responsible only for corporate insolvency, not personal.

Other criteria

Level of debt is one indicator but there are others, in particular the value of the insolvent’s remaining assets from which to pay creditors, if at all, and fund the administration, more relevant to the question of whether there is a need for a government role in the system.


As Professor Jason Harris and I have reported,[2]

  • Around 58% of companies that enter liquidation have less than $10,000 in assets, and 37% of companies have no assets.
  • A 2013 study showed that liquidators conducted unfunded work in external administrations to the value of over $48m annually.
  • A high proportion pay no remuneration to the liquidator at all – ASIC has since indicated this is in the order of 30%. A 2020 AFSA report showed that around 30% of bankrupt estates handled by private trustees paid no remuneration.
  • 92% of external administrations pay no dividend returns to creditors; in only 2.3% of cases was the return estimated at more than 21c in the dollar. Dividend returns to creditors in bankruptcy were in the order of 2.2 cents.

While the value of the remaining assets goes to the funding of the system, the amount of liabilities and consequent numbers of creditors, including employees, go to the need for companies to be properly wound up, often irrespective of having no or limited remaining assets.

Some general comparisons

It is perhaps not wise or valid to make too much of a comparison between the respective complexities of personal and corporate insolvency administrations but some general comparisons can be made. 

  • Bankruptcy involves an individual who has their own personal assets, separate from the bankrupt estate, and their continuing rights of action; in contrast, everything goes in a liquidation. 
  • Provability of debt is more important in bankruptcy given what can be an ongoing liability of the ex-bankrupt if a debt is not provable; the few non-provable debts in liquidation simply disappear. 
  • No adverse status is imposed on directors of a liquidated company such that the liquidator needs to monitor their conduct or release them; the bankruptcy trustee has the difficult task of monitoring the bankrupt and deciding on their overseas travel plans and their time of discharge. 
  • Liquidations of most companies are those in the SME category some of which can present financial and accounting complexity, and complex asset and employee issues; these increase with the larger the business.  Most bankruptcies are of few assets and under $50,000 in liabilities; but the more difficult involve family trusts, complex asset holdings and income arrangements, equitable and family law claims, claims to personal property or proceedings, and sale of the family home. 

Other comparisons could be made but as a generalisation, corporate insolvency often involves more accounting, transactional and financial issues, personal insolvency more legal, personal and rights issues.  The bankruptcy trustee is dealing, for some years, with an actual person “a human being whose life must continue before and after insolvency”.[3] The liquidator deals with an inanimate financial entity with ‘no soul to be damned and no body to be kicked’[4] which is ultimately put to death.

Perhaps we just say that personal and corporate insolvency are the “same same but different”.


[1] Answers to Questions on Notice – Parliament of Australia (

[2] Rebuilding the structure of the Australian insolvency system, Attachment A to submission 18 to the PJC.  Figures are as at the time of writing of our article. Submissions – Parliament of Australia (

[3] Re Rae Rattee J [1995] BCC 102.

[4] Various

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