Insolvency Lawyers Brisbane: What They Do and When You Actually Need One

An insolvency lawyer advises directors, creditors, and companies when a business is in financial difficulty or formal insolvency proceedings have begun. If your company cannot pay its debts as they fall due, you need one now — not after the liquidator knocks.

What Insolvency Lawyers Actually Do

The term “insolvency lawyer” covers a broad range of work. In commercial practice in Queensland, the role divides into four distinct streams: director advice, creditor advice, assistance to liquidators and insolvency practitioners, and restructuring work. Most clients come to us in one of those lanes, usually with some urgency.

Director Advice

When a director calls and says “I think my company is in trouble,” the first thing I do is establish whether the company is actually insolvent under s 95A of the Corporations Act. Insolvency is not about net assets — it is about cash flow. Can the company pay its debts as and when they fall due? If the answer is no or “I’m not sure,” we are already in legally sensitive territory.

From there, the work branches into several directions depending on what is happening:

• Insolvent trading exposure under s 588G. Directors have a duty not to incur debts when the company is insolvent or when there are reasonable grounds to suspect insolvency. Breach exposes the director to personal civil liability and, in serious cases, criminal prosecution under s 588G(3). The defences under s 588H require the director to show they had reasonable grounds to expect solvency, or that they relied on information from a competent person, or that they did not take part in management due to illness or reasonable cause. Each defence requires evidence — contemporaneous board minutes, financial reports, the date and content of advice received.
• Voluntary administration under s 436A. When a director concludes the company is insolvent or likely to become insolvent, they can resolve to appoint a voluntary administrator. The object of voluntary administration under s 435A is to maximise the chances of the company continuing, or to produce a better outcome for creditors than immediate winding up. The director retains no management powers once the administrator is appointed, but the decision to enter administration — and the timing of that decision — has significant consequences for the director’s personal liability.
• Director Penalty Notices. The ATO issues DPNs to directors personally when the company has not lodged or paid PAYG withholding, net GST, or superannuation guarantee charge. There are two types: lockdown DPNs (where the liability is locked in and the only way to extinguish the director’s personal liability is to pay or appoint a voluntary administrator or liquidator) and non-lockdown DPNs (which offer more options). The distinction turns on whether the company lodged its BAS and SGC statements on time.
• Safe harbour under s 588GA. Since 2017, directors have had access to a statutory defence to insolvent trading claims if they are taking a course of action “reasonably likely to lead to a better outcome for the company and the company’s creditors as a whole.” This is the safe harbour provision — but it requires genuine, structured restructuring work and professional advice. It does not apply if the company is not paying employee entitlements or complying with tax reporting obligations.

Creditor Advice

Creditors — whether trade creditors, financiers, or landlords — have powerful legal tools available once a debtor company stops paying. The most important is the statutory demand under s 459E of the Corporations Act. A statutory demand can only be issued by a creditor to a company (not an individual) and must comply strictly with the prescribed form and process. Get the demand wrong and it can be set aside on a technicality — and the costs consequences are significant.

Beyond statutory demands, creditors may need advice on:

• Filing a winding up application under s 459P after a statutory demand is not complied with or set aside.
• Lodging a proof of debt in a liquidation and understanding the priority order under s 556 — employees get paid before unsecured creditors, and the ATO’s priority position for certain debts changed significantly following the 2020 amendments.
• Challenging transactions before the liquidation — including preferences paid before appointment.
• Recovery against directors personally where insolvent trading is established.

A good insolvency lawyer advises creditors on the realistic prospects of recovery before spending money on legal process. In my experience, the biggest mistake creditors make is chasing an underfunded company through expensive litigation when the money simply is not there. We give commercial advice — not just legal process.

Liquidator Assistance

We regularly act for insolvency practitioners in Queensland, assisting with the legal aspects of their appointments. That includes:

• Public examinations under ss 596A and 596B. A liquidator can compel a person to attend before a court and answer questions about the company’s affairs. Section 596A examinations are mandatory for officers; s 596B examinations can extend to any person who was involved with the company. These examinations are powerful investigative tools — evidence gathered can be used in subsequent recovery proceedings.
• Voidable transaction recovery. Under Part 5.7B of the Corporations Act, a liquidator can recover unfair preferences (s 588FA), uncommercial transactions (s 588FB), unfair loans (s 588FD), and unreasonable director-related transactions (s 588FDA). The standard look-back periods range from six months (unfair preferences, related party is four years) to ten years for transactions defrauding creditors under s 588E.
• Insolvent trading claims against directors under s 588M. Where the liquidator can establish that a director allowed debts to be incurred while the company was insolvent, the liquidator can recover those amounts from the director personally. These claims are complex, fact-intensive, and often heavily defended.

Restructuring Advice

Not every financially stressed company ends in liquidation. Restructuring is increasingly common — particularly since the safe harbour regime in 2017 and the introduction of the small business restructuring (SBR) process in January 2021 for companies with liabilities under $1 million. An insolvency lawyer’s role in restructuring includes reviewing and negotiating Deeds of Company Arrangement (DOCAs), advising on the safe harbour conditions, and working alongside the company’s accountant and proposed restructuring practitioner to document the restructuring plan in a way that satisfies s 588GA’s requirements.

For detailed information about our insolvency and restructuring services, visit our insolvency lawyers Brisbane service page.

The Four Situations That Actually Require an Insolvency Lawyer

Seventeen years of practice tells me most people call too late. The situations below are the ones where delay directly increases the director’s personal exposure or reduces the options available. If any of these apply, call today.

1. You Have Received a Director Penalty Notice

A DPN is the ATO’s mechanism for making directors personally liable for their company’s unpaid tax debts. Under Subdivision 269-B of Schedule 1 to the Taxation Administration Act 1953 (Cth), the ATO can issue a DPN if the company has failed to pay PAYG withholding, net GST, or superannuation guarantee charge.

The critical distinction is between lockdown and non-lockdown DPNs.

A lockdown DPN arises where the company did not lodge its activity statements and SGC statements within three months of the due date. Once locked down, the director’s personal liability cannot be extinguished by placing the company into voluntary administration or liquidation — it can only be discharged by paying the debt in full. Many directors discover this when it is already too late to use the insolvency process as a shield.

A non-lockdown DPN arises where the company lodged on time but did not pay. Here, a director has options: pay the debt, place the company into voluntary administration, or place the company into liquidation within the 21-day response period. Each option has very different consequences for the director personally and for creditors.

The 21-day clock starts from the date the DPN is issued — not the date you receive it. If you have received a DPN, get legal advice today. See our post on the ATO Director Penalty Notice crackdown in Queensland for current enforcement trends.

2. A Statutory Demand Has Arrived

A statutory demand under s 459E of the Corporations Act is a formal written demand requiring the company to pay a debt of at least $4,000 (increased from $2,000 in July 2021). It must be in the prescribed form. The company has 21 days from the date of service to either pay the debt, reach a satisfactory arrangement with the creditor, or make an application to the court to set aside the demand.

If none of those things happen within 21 days, the company is presumed insolvent under s 459C. That presumption makes it significantly easier for a creditor to obtain a winding up order — and it can be used against the company in subsequent proceedings.

The grounds to set aside a statutory demand are narrow: there is a genuine dispute about the debt (s 459H(1)(a)), the company has an offsetting claim that reduces the debt below $4,000 (s 459H(1)(b)), or there is some other reason the court considers it appropriate (s 459J). Courts interpret these grounds strictly. The application must be filed within the 21-day period — there is no extension, no matter how good your reason for delay.

Read our detailed guide on how statutory demands work in Queensland. If you have received a demand and the 21 days are running, call immediately.

3. Your Company Is Behind on ATO, Super, or Trade Creditors

A company that has fallen behind on the ATO, has unpaid superannuation, or is stretching trade creditors beyond their terms is not necessarily insolvent — but it is in a zone where legal advice is essential before the situation deteriorates further.

This is precisely the scenario the safe harbour provisions under s 588GA were designed for. A director who takes a “course of action” reasonably likely to lead to a better outcome for the company and its creditors is protected from personal insolvent trading liability under s 588G while that course of action is being pursued. But the protection is not automatic — it requires:

• Proper advice from a suitably qualified adviser (accountant, insolvency practitioner, or lawyer) about the company’s financial position.
• A documented restructuring plan, however informal at first.
• Continued payment of employee entitlements.
• Continued compliance with tax reporting obligations (not necessarily payment — but lodgement).

The reason an insolvency lawyer is critical here — and not just an accountant — is that only a lawyer can provide legally privileged advice. If the company ultimately goes into liquidation and the liquidator investigates insolvent trading, the privileged advice to the director cannot be compelled in evidence. That protection matters enormously when personal liability is in play.

4. A Liquidator Has Contacted You

If a liquidator or their solicitor has written to you — whether about a public examination, a preference recovery claim, or a request for information — you need legal representation before you respond to anything.

Liquidators have significant powers under the Corporations Act. Under s 477, a liquidator can investigate the company’s affairs, conduct public examinations, recover property, and pursue officers for insolvent trading. Under s 596A, the court must issue a summons requiring a current or former officer of the company to appear for examination if the liquidator requests it. Under s 596B, the court may issue a summons to any person the liquidator believes has relevant information — including accountants, lawyers, financiers, and business partners who dealt with the company.

Evidence given at a public examination is admissible in subsequent proceedings. There is no right to silence — officers have limited grounds to refuse to answer questions. Getting a lawyer on your side before the examination is not optional. It is essential.

On preferences: if your company was paid in full by a company that subsequently went into liquidation within six months of the payment (four years if you are a related party), you may receive a demand to repay that amount as an unfair preference under s 588FA. There are defences — the most important being the good faith defence under s 588FG(2), which requires you to show you received the payment in good faith, without knowledge of insolvency, and in circumstances where a reasonable person would not have suspected insolvency. Getting advice immediately preserves your ability to run that defence.

What an Insolvency Lawyer Can Do That an Accountant Cannot

This is one of the most common questions I hear, particularly from directors who are already working with a good accountant. The honest answer is: both professions are essential, but they do different things, and only one of them can do what matters most when you are personally exposed.

Legal professional privilege. Advice from a lawyer — unlike advice from an accountant — is legally privileged. That means a liquidator cannot compel you to produce the written advice you received from your lawyer when you were deciding what to do about the company’s financial position. That privilege protects your decision-making process. It may be the difference between a successful safe harbour defence and a personal liability finding. Your accountant’s file, by contrast, can be subpoenaed.

Court representation. An accountant cannot appear in the Federal Court, the Supreme Court of Queensland, or any other court on your behalf. If a statutory demand needs to be set aside, if a winding up application is being challenged, or if a liquidator is pursuing you for insolvent trading, you need a lawyer — and specifically one who knows insolvency law and the relevant court procedures.

Statutory defence preparation. The defences to insolvent trading under s 588H require specific legal analysis and evidence assembly. An accountant can help prepare financial analysis to support the defence, but the legal construction of the defence — establishing which elements apply, what evidence is required, and how the defence will hold up under cross-examination — is legal work.

Examining transactions under Part 5.7B. If a liquidator is alleging that payments made before liquidation were unfair preferences or uncommercial transactions, the analysis of whether those transactions are voidable under Part 5.7B, and what defences are available, is legal analysis. It requires understanding the law, the case law, and the facts — all at once.

The best outcomes I have seen come from directors who had both a good accountant and a good insolvency lawyer working in parallel, with clear lane demarcation: the accountant handles the numbers and the restructuring mechanics; the lawyer handles the privileged advice, the court proceedings, and the statutory defences.

Director Personal Liability: The Most Misunderstood Aspect of Insolvency Law

Here is what most directors do not understand about s 588G: liability does not attach when the company goes into liquidation. It attaches when the company became insolvent and the director allowed a debt to be incurred after that point.

Section 588G(1) requires three elements: (a) the company is insolvent at the time of the debt, or becomes insolvent by incurring it; (b) there are reasonable grounds to suspect insolvency; and (c) the director fails to prevent the company incurring the debt. The relevant test for insolvency is the cash flow test under s 95A — not net asset position. A company with $2 million in assets and only $300,000 in liquid assets may be insolvent if it cannot meet obligations as they fall due.

The defences under s 588H are:

1. Reasonable grounds to expect solvency (s 588H(2)): The director had reasonable grounds to expect, and did expect, that the company was solvent and would remain so after incurring the debt. This requires genuine, contemporaneous belief — supported by financial information actually reviewed at the time.
2. Reliance on a competent person (s 588H(3)): The director relied on information provided by a person they believed was competent to assess the company’s solvency, and that person concluded (or implied) solvency. This defence is strongest when the director actually engaged with the information they were given — not when they rubber-stamped reports they had not read.
3. Non-participation (s 588H(4)): The director did not take part in the management of the company at the relevant time due to illness or other reasonable cause. This is rarely available in practice — courts scrutinise it carefully.
4. All reasonable steps taken (s 588H(5)): The director took all reasonable steps to prevent the company incurring the debt. This is a high bar.

To illustrate the timing issue concretely: I acted for a director in a matter where the company had been meeting its obligations for several months using a combination of delayed supplier payments and a personal loan from the director. The company eventually went into liquidation. The liquidator alleged insolvent trading dating back seven months to when the company first began stretching its creditors. The director believed the company had been solvent throughout that period because it was still operating. It had not been. The case turned on the point at which a reasonable person in the director’s position would have suspected insolvency — and the director’s failure to obtain financial advice at the critical time significantly undermined the s 588H(2) defence. Early advice would have changed the outcome.

For information about director disputes and liability more broadly, visit our director disputes service page.

How to Choose an Insolvency Lawyer in Brisbane

Not all commercial lawyers do insolvency work. Not all insolvency lawyers do the kind of commercial litigation that often runs alongside insolvency proceedings — preference recovery actions, public examinations, director liability claims. When you are choosing an insolvency lawyer in Brisbane, here are the questions that matter.

Do they appear in court? Insolvency work regularly ends up in the Federal Court or the Supreme Court of Queensland. Your lawyer needs to be comfortable in those courts, not just capable of drafting letters. Ask them about recent court appearances in insolvency matters.

Are they primarily an insolvency practice or is it a small corner of a general litigation firm? There is no right or wrong answer to this — some excellent insolvency lawyers work in general commercial firms. But it is worth understanding how much of their practice is insolvency and restructuring specifically, and whether they work alongside insolvency practitioners regularly. Relationships with liquidators matter — they can affect how a matter proceeds.

Will you deal directly with the principal? In larger firms, the partner who pitches you may not be the person doing your work. In a matter with high personal stakes — director liability, DPN response, liquidator examination — you want consistent, experienced advice from the person responsible for your matter. At Boss Lawyers, every insolvency matter is handled by Mark Harley directly. You have direct access to the principal solicitor from the first call.

Do they give commercial advice or just legal process? The best insolvency lawyers understand the commercial reality of their clients’ situations. The question is not just “what does the law say” — it is “what is the best outcome achievable here, and what is the realistic path to get there?” That requires experience, judgment, and honesty about what is and is not possible.

Mark Harley has been practising commercial and insolvency law in Brisbane for 17 years. Boss Lawyers acts for directors, creditors, and companies across the full spectrum of insolvency matters — from statutory demands and voluntary administration through to public examinations and insolvent trading litigation. We also work with insolvency practitioners on complex recovery matters.

See our recent post on voluntary administration lawyers Brisbane for more detail on the VA process and how a lawyer can help directors navigate it.

Frequently Asked Questions

What does an insolvency lawyer do for a director?

An insolvency lawyer advises directors on their legal duties and personal liability exposure when a company is in financial difficulty. This includes assessing insolvent trading risk under s 588G of the Corporations Act 2001 (Cth), advising on safe harbour protection under s 588GA, responding to Director Penalty Notices from the ATO, and — where necessary — advising on voluntary administration, liquidation, or restructuring. A lawyer also provides legally privileged advice, which an accountant cannot, protecting the director’s communications from compelled disclosure in subsequent proceedings.

When should I contact an insolvency lawyer?

You should contact an insolvency lawyer as soon as you have a genuine concern about whether your company can pay its debts as they fall due. Earlier is always better — the safe harbour provisions under s 588GA require you to be taking a “course of action reasonably likely to lead to a better outcome” before insolvency crystallises. If you have received a statutory demand, a Director Penalty Notice, or a communication from a liquidator, you should seek advice immediately. The 21-day window in both a statutory demand and a non-lockdown DPN leaves no room for delay.

How much does an insolvency lawyer cost in Brisbane?

Insolvency legal costs in Brisbane vary significantly depending on the complexity of the matter. Initial director advisory consultations are available at a fixed fee. Statutory demand responses, preparation of set-aside applications, and DPN advice are also commonly available at fixed or capped fees for straightforward matters. Contested litigation — public examinations, insolvent trading defences, preference recovery proceedings — is typically billed on time-cost with regular reporting to the client. At Boss Lawyers, we discuss costs clearly at the outset and provide fee estimates before proceeding. Call 1300 267 711 to discuss your matter.

What is the difference between voluntary administration and liquidation?

Voluntary administration under Part 5.3A of the Corporations Act is a process designed to give an insolvent company a chance to restructure or reach a compromise with creditors through a Deed of Company Arrangement (DOCA), before committing to liquidation. A voluntary administrator is appointed by the directors (s 436A) and takes control of the company while investigating its affairs and reporting to creditors. Creditors vote on the outcome at the second creditors meeting — they can accept a DOCA, return the company to the directors, or resolve to liquidate. Liquidation, by contrast, involves winding up the company’s affairs, realising assets, distributing proceeds to creditors in the statutory order of priority under s 556, and deregistering the company. Voluntary administration preserves optionality; liquidation does not.

Can an insolvency lawyer stop a winding up application?

Yes — in appropriate circumstances. A winding up application based on failure to comply with a statutory demand can be defended by challenging the demand (if not already set aside), applying to have the winding up order stayed, or demonstrating that the company is in fact solvent and the presumption under s 459C has been rebutted. A solvent company that has simply had a disputed debt demanded by a creditor has strong grounds to resist winding up. A genuinely insolvent company has fewer options, but an insolvency lawyer can advise on voluntary administration as an alternative and may seek a short adjournment to allow the administration process to proceed. Outcomes depend entirely on the facts — no result can be guaranteed.

Get Advice From Mark Harley at Boss Lawyers

If your company is facing financial difficulty — whether that is an unpaid ATO debt, a statutory demand, a DPN, or a call from a liquidator’s solicitor — the time to act is now. The options available to directors narrow quickly once formal insolvency proceedings commence.

Mark Harley is a principal solicitor with 17 years of commercial and insolvency experience in Brisbane. Boss Lawyers acts for directors, creditors, and businesses at every stage of the insolvency process — from early advice through to contested court proceedings.

Call 1300 267 711 or visit bosslawyers.com.au/service/insolvency-lawyers-brisbane/ to enquire.

This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.