What is a solvency resolution?

Passing a solvency resolution is a determination by a company’s directors that the company, in their opinion is able to pay its debts as and when they fall due. Directors are required to have a reasonable basis for passing this resolution and the resolution can only be passed by a majority.

Generally, the solvency resolution must be passed and stored by the directors of the company within 2 months of the company’s annual review date.

A company’s solvency resolution may be a:

• Positive solvency resolution – This occurs when the directors believe that the company will be able to pay its debts as and when they fall due. There is no need to notify ASIC if a positive solvency resolution is passed, however the resolution must be stored on file and presented to ASIC upon their request
• Negative solvency resolution – This occurs when the directors believe that the company is NOT able to pay its debts as and when they fall due. When a negative solvency resolution is passed, the company must lodge an ASIC Form 485 within 7 days of the resolution being passed.

All information provided on this webpage is general information about our products and services. Nothing on this webpage is intended to be professional advice of any kind and should not be relied on as such. You should obtain specific financial, legal or other professional advice before relying on the content of this webpage. By not seeking such advice, you accept the risk that the information on this webpage may not meet the specific needs of your business. Our liability is limited to the maximum extent permitted by applicable law in accordance with our website terms and conditions.

Updated — Sep 30, 2019