Private Credit Risk and Property Developers: What Queensland Directors and Creditors Need to Know After the Adgemis Collapse

On 4 August 2026, Australian media turned a spotlight on what may be the largest single hospitality insolvency in Australian history: the examination of Jon Adgemis’s Public Hospitality Group in the Federal Court. Adgemis — a former KPMG executive turned Sydney publican — had borrowed $1.8 billion largely from private credit funds to build a portfolio of pubs that had cost less than $300 million to acquire. When the group collapsed and Adgemis declared personal bankruptcy, investors, creditors, and now Federal Court examiners were left to unravel how the debt had accumulated.

The case has much broader implications for private credit risk and director liability across Australia — and particularly for Queensland, where rising construction insolvencies and property development collapses have already put hundreds of creditors at risk throughout 2025 and 2026. If you are a director of a company with private credit exposure, or a creditor owed money by a company using non-bank finance, you need to understand what the Adgemis collapse reveals about the legal risks you face.

What Is Private Credit — and Why Should Queensland Directors and Creditors Care?

Private credit (also called private debt or non-bank lending) refers to loans made by entities operating outside the traditional banking system. Unlike banks, private credit funds are generally not authorised deposit-taking institutions (ADIs) subject to APRA prudential regulation. They include unlisted funds, family offices, wholesale investment trusts, and managed investment schemes that lend to developers and businesses that cannot — or choose not to — access bank finance.

In Australia, ASIC estimates that approximately $250 billion in private credit loans are currently outstanding. In its June 2026 notice to the sector, ASIC described private credit as facing “its first real test,” warning that “tighter liquidity, emerging borrower stress and signs of credit deterioration are testing valuations, governance and investor disclosures.”

For Queensland directors and creditors, the key features of private credit lending to understand are:

• High cost: Interest rates of 15–25% per annum are common, compared to bank rates of 6–9%. This dramatically compounds the pressure on borrowers whose projects run late or over budget.
• Complex security stacking: Private lenders typically take first-ranking real property mortgages and general security agreements (GSAs) over the borrower’s assets, registered on the Personal Property Securities Register (PPSR). Trade creditors and employees rank well behind these secured creditors in insolvency.
• Limited oversight: Private credit funds can operate without the capital adequacy requirements, conduct obligations, or disclosure obligations that apply to banks. Valuation methodologies are often opaque.
• Investor exposure: Many funds raise money from self-managed super funds (SMSFs) and retail investors attracted by high advertised returns, who may not appreciate that their investment is effectively a high-risk development loan.

The Adgemis Examinations: What Liquidators Are Looking At

The Federal Court public examinations that commenced this week are a formal process under Part 5.9 of the Corporations Act 2001 (sections 596A–596F). Liquidators can summons any person who has been involved in, or has information about, the affairs of the company — including former directors, financial advisers, valuers, and private credit fund managers. Witnesses are examined under oath and cannot refuse to answer questions on grounds of self-incrimination (though their answers cannot be used against them in criminal proceedings: section 597(12A)).

In the Adgemis hearings, liquidators from KPMG are expected to probe several key issues:

• How valuations were supported: Multiple reports suggest that property valuations were increased shortly after acquisition, supporting further debt drawdowns. Were valuations accurate and grounded in realistic assumptions — or inflated to support ongoing lending?
• How lending continued: Given the hotel portfolio was generating limited income and many properties stood idle awaiting renovation, how was Adgemis able to continue raising new funds from private credit lenders? Who was exercising due diligence?
• Where investor money went: Investors in private credit funds that lent to the Adgemis group generally had limited visibility over where their funds were being deployed. ASIC is concerned that disclosure obligations were not met.
• Related-party transactions: The liquidator will scrutinise payments to related parties that may have reduced the pool available to creditors, including potential voidable transactions under sections 588FA (unfair preferences) and 588FB (uncommercial transactions).

A Deutsche Bank-led syndicate, owed $371 million, has already sold five Sydney pubs for around $109 million — recovering less than 30 cents in the dollar on secured debt. Unsecured creditors face a significantly worse outcome.

Director Liability When a Private Credit-Funded Company Collapses

If you are a director of a Queensland company — particularly in property development, construction, or hospitality — that has used private credit, the following legal risks apply:

1. Insolvent Trading: Section 588G

Under section 588G of the Corporations Act, a director is personally liable for debts incurred by the company at a time when the company was insolvent (unable to pay its debts as they fell due under the section 95A cash flow test), if the director was aware, or ought to have been aware, that insolvency was likely. Personal liability applies to the amount of the debt incurred — and in a private credit scenario, each interest accrual, drawdown, and rollover represents a new debt incurred.

For companies with 15–20% per annum private credit obligations eating into limited income, the section 95A test is often breached well before directors recognise (or are willing to recognise) the problem. The safe harbour under section 588GA is available if a director is genuinely pursuing a better outcome — but only if the company’s tax obligations (PAYG withholding and superannuation guarantee) are being met. In an Adgemis-type scenario where ATO debts accumulate alongside private credit obligations, safe harbour may not be available.

2. Duty of Care and Diligence: Section 180

Section 180 requires directors to exercise the degree of care and diligence that a reasonable person in their position would exercise. In a private credit context, courts will scrutinise whether directors: properly understood the terms of private credit facilities before executing them; monitored covenant compliance and loan-to-value (LTV) ratios; obtained independent valuations rather than accepting lender-appointed valuers; and sought legal or financial advice when debt levels escalated beyond what income could service.

3. Director Penalty Notices From the ATO

When a company is under severe cash flow pressure from high-cost private credit, it is common for directors to defer ATO payments — PAYG withholding and superannuation guarantee contributions — in favour of paying lenders who are actively threatening enforcement. This is a critical mistake. Under the Tax Administration Act 1953, the ATO can issue Director Penalty Notices (DPNs) making directors personally liable for unpaid PAYG and super. Since 1 July 2026, Payday Super means superannuation must be paid within 7 days of payday — increasing the speed at which personal DPN liability crystallises. With 84,000+ DPNs issued in FY2025–26, directors in financial distress who prioritise private credit repayments over ATO obligations face immediate personal exposure.

4. ASIC Investigative Action

ASIC has confirmed that poor practices in private credit are a 2026 enforcement priority and that multiple enforcement investigations are underway. Where directors of companies in private credit structures have misled investors, failed to disclose material risks, or engaged in related-party transactions that preferenced themselves over creditors, ASIC may seek disqualification under section 206C, civil penalties under section 1317E, or refer matters to the CDPP for criminal charges under section 184 (dishonest conduct).

What Creditors Need to Do When a Private Credit-Funded Company Fails

If you are a trade creditor, subcontractor, employee, or investor owed money by a company with private credit exposure that has entered voluntary administration, receivership, or liquidation, your position is affected by the priority waterfall:

Priority	Creditor Type	Mechanism
1st	Secured creditors (private credit lenders with PPSR-registered first-ranking GSA/mortgage)	Enforce security outside insolvency, or receive priority distribution in liquidation
2nd	Employee entitlements (wages, super, leave)	Section 556 — employees are priority unsecured creditors up to the cap
3rd	Liquidator’s costs and expenses	Charged to the estate before distribution
4th	Unsecured creditors (trade creditors, investors in private credit funds)	Pari passu — share equally from the remaining pool, often cents in the dollar

For Queensland creditors, the practical steps in any insolvency involving private credit are:

1. Search the PPSR immediately. Identify all registered security interests over the company’s assets. This tells you who ranks ahead of you and what assets they claim. The PPSR search fee is nominal — ignorance of the register is not a defence.
2. Lodge a formal proof of debt. Provide the liquidator or administrator with your proof of debt as soon as possible. This preserves your right to vote and receive any distribution.
3. Attend the first creditors’ meeting. Critical decisions are made at this meeting — whether to proceed to DOCA or liquidation, and which firm manages the process. Your vote matters.
4. Request the administrator’s report. Under section 439A, administrators must provide a written report and statement of affairs before the second creditors’ meeting. Read it carefully — it will identify the estimated outcome for creditors and flag any related-party transactions.
5. Investigate voidable transactions. If the company paid down private credit facilities, paid management fees to related entities, or disposed of assets in the six months (or four years for related parties) before insolvency, those payments may be recoverable by the liquidator as unfair preferences (section 588FA) or uncommercial transactions (section 588FB). A lawyer can advise whether a creditor-funded investigation is worthwhile.
6. Consider a reviewing liquidator application. If you have concerns about how the external administrator is managing the estate, you can apply to ASIC to appoint a reviewing liquidator under Division 90 of Schedule 2 to the Corporations Act.

Five Warning Signs Your Company’s Private Credit Structure Is at Breaking Point

Directors of Queensland companies with private credit exposure should treat the following as red flags requiring immediate legal advice:

1. Interest is being capitalised, not paid. If your private credit facility is rolling unpaid interest into the principal balance, the debt is compounding exponentially. At 20% per annum, a $10 million loan becomes $12 million in 12 months — without paying a cent.
2. Loan-to-value covenants are being tested. Private credit lenders include LTV covenants in their facilities. If property values decline, a technical breach can trigger acceleration of the entire facility — not just overdue interest.
3. ATO payments are being deferred. As noted above, deferring PAYG withholding and super contributions while paying private credit lenders crystallises DPN liability for directors personally.
4. You are refinancing debt to pay interest. Drawing down on a new facility to pay interest on an old one is a classic indicator of an insolvency trajectory. Courts regard this pattern as evidence that a director knew, or ought to have known, the company was insolvent.
5. Multiple mortgages over the same property. As in the Adgemis case, multiple private credit lenders may hold separate mortgage interests over the same asset. When the asset is sold, each lender takes from the same pool. If aggregate debt exceeds asset value, there is nothing left for unsecured creditors.

How Boss Lawyers Can Help

Boss Lawyers regularly acts for directors and creditors in complex insolvency matters, including cases involving non-bank lending structures, multi-layered security interests, and ASIC enforcement proceedings. Whether you are:

• A director facing ATO DPNs, a demand from a private credit lender, or an insolvent trading claim;
• A trade creditor owed money by a company in voluntary administration or liquidation; or
• An investor who placed funds into a private credit vehicle that has failed to return capital —

Mark Harley has the experience and strategic focus to advise you on your real options. The earlier you get advice, the more options you have.

Frequently Asked Questions

What is private credit and why is it risky for property developers in Australia?

Private credit refers to loans provided by non-bank lenders — including unlisted funds, family offices, and wholesale investment vehicles — outside the regulated banking system. These lenders are subject to far less regulatory oversight than banks and often charge interest rates of 15–25% per annum. ASIC has $250 billion in private credit loans outstanding on its radar as of 2026, and has warned the sector faces its “first real test” as property values soften and borrower stress rises.

What director liability risks arise when a company funded by private credit becomes insolvent?

Directors face insolvent trading liability under section 588G if debts are incurred after the company can no longer pay its existing debts. They also face breach of the duty of care under section 180, and personal liability for Director Penalty Notices from the ATO if PAYG and super obligations are unmet. ASIC is also investigating private credit misconduct — directors in these structures face scrutiny of valuations, related-party transactions, and investor disclosure.

What should creditors of a company with private credit exposure do when it enters insolvency?

Act immediately: search the PPSR to understand who holds security ahead of you; lodge a proof of debt; attend the first creditors’ meeting; obtain and read the administrator’s section 439A report; and seek legal advice on whether voidable transactions have reduced the creditor pool. If you have concerns about the liquidator’s conduct, you can apply to ASIC for a reviewing liquidator appointment.

Can a director use the safe harbour defence if the company borrowed from a private credit fund?

Yes — section 588GA safe harbour is available if the director was genuinely pursuing a course of action reasonably likely to lead to a better outcome than immediate administration. However, safe harbour is not available if the company’s tax obligations are not being met, or if its books and records are not properly maintained. Directors relying on private credit refinancing as their plan must be able to demonstrate that refinancing was genuinely realistic at the time.

What is a liquidator’s public examination and what can it reveal about a company collapse?

When private credit arrangements intersect with insolvency, directors and creditors need specialist legal advice quickly. Boss Lawyers’ insolvency team in Brisbane advises directors facing DPN exposure, creditors asserting PPSR priority, and businesses dealing with liquidator examinations. Contact Mark Harley on 1300 267 711.

A liquidator’s public examination under sections 596A–596F of the Corporations Act is a formal court process where the liquidator summons directors, officers, and related parties to answer questions under oath. Examinations are generally public. The Adgemis Federal Court examinations this week are scrutinising how $1.8 billion in debt was accumulated, whether valuations were realistic, and what disclosure was made to investors. Examination transcripts can form the basis of recovery litigation by the liquidator.

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Disclaimer: This article is general information only and is not legal advice. You should obtain professional advice specific to your circumstances. The information in this article is current as at 5 August 2026.

Author: Mark Harley, Principal Solicitor
Boss Lawyers Pty Ltd | Level 27, Santos Place, 32 Turbot Street, Brisbane QLD 4000
Phone: 1300 267 711 | bosslawyers.com.au