Free solvency resolution templates (Australia)

Here are all the resources you need to prepare and pass your company’s solvency resolution.

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Businesses that operate under a corporate structure according to Australian law have a lot of paperwork they need to file. For company officeholders, a solvency resolution is one of those essential documents that must be passed annually. A failure to do so could result in fines and penalties.

What is a solvency resolution?

A solvency resolution is a declaration made by a company's directors about whether the firm can or cannot pay its debts when they are due. The resolution must be passed annually no more than two months after the company's annual review. The assessment of the company's solvency must be made at the time the resolution is declared.

The document satisfies Section 588G of Australia's Corporations Act. A company that is deemed by its directors to be insolvent cannot trade.

solvency resolution template from Lawpath

Download this template at Lawpath

When should I use a solvency resolution?

The company's directors must pass a solvency resolution annually within two months of the company's annual review date. The resolution must be agreed to by a majority of directors.

When it comes to passing a solvency resolution, only one of two outcomes is possible:

  • Positive solvency resolution: This is when the directors of the company agree that they are able to pay debts when they are due. Australia's financial regulator, ASIC, does not need to be notified in the case of a positive solvency resolution, but the document must be saved on file.
  • Negative solvency resolution: This is when the company directors believe that debts cannot be serviced when they are due. A negative solvency resolution must be lodged with ASIC (Form 485) within seven days.

Solvency resolution vs. annual review

Although a solvency resolution must be filed within two months of a company's annual review, these two documents serve different purposes.

An annual review is a yearly assessment to ensure that regulators are up to date with a company's current details. The annual review contains company details, an annual filing fee, and your company's unique 8-digit corporate key.

The solvency resolution, which comes after, is a declaration of a company's ability to service its debts.

What does a solvency resolution include and not include?

A solvency resolution includes:

  • Company name.
  • A paragraph that acknowledges the company's obligations under the Corporations Act and provides the directors' opinion about whether the company is solvent or not.
  • Name, title, and signature of each director.

A solvency resolution does not include:

  • Financial statements

How effective is a solvency resolution?

A solvency resolution is a mandatory document all corporate directors must pass annually. When a company is deemed to be insolvent, ASIC regulators are notified right away (and the next steps in the process are carried out). If the company is able to service its debts, it does not have to notify regulators but must keep the document on file.

You can copy and paste the paragraph that is used to notify regulators about your company's solvency status (see templates below) and fill in the blanks, such as company name and date.

Do I need a lawyer for a solvency resolution?

A solvency resolution is usually one page in length and can be put together fairly quickly using one of the many free templates found online. You do not need a lawyer. If you would like to have a lawyer look over your solvency resolution documents, the table below compares online legal platforms.

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How do I write a solvency resolution?

A solvency resolution is fairly easy to write. Just include:

  • Company name
  • Acknowledgment of relevant legislation, i.e., pursuant to section 248A of the Corporation Act 2001…
  • The solvency resolution (usually one paragraph in length acknowledging that the company is solvent or insolvent on the date the review was conducted)
  • Name, title, and signature of each director

You can copy and paste the paragraph that is used to notify regulators about your company's solvency status (see templates below) and fill in the blanks, such as company name and date.

Legal documents like a solvency resolution can be found at the following websites:

  • Lawpath: As one of Australia's largest online legal resources, Lawpath is ideal for small businesses and entrepreneurs. You can browse free samples but will need to sign up customise your template.
  • Law firms: Several Australian law firms provide solvency resolution templates.

Frequently Asked Questions about solvency resolutions

Can a solvency resolution be filed electronically?

Yes, a solvency resolution can be lodged online with ASIC. A complete user guide is available.

How much does it cost to lodge a solvency resolution?

ASIC doesn't charge you for lodging your solvency resolution, but you must pay your annual review fee before submitting the document. Depending on the company type, your annual fee can run anywhere from $51 to $1,267. You will be charged an $82 fee if you file up to one month late and $340 if you file more than one month late.

Are certain companies exempt from passing a solvency resolution?

Yes, a company is exempt from filing a solvency resolution if it has lodged a financial report with ASIC under Chapter 2M of the Corporations Act within the 12-month period before the review date. These companies include:

  • Public companies
  • Disclosing entities
  • Larger proprietary firms
  • Registered schemes
  • Small proprietary companies that are controlled by a foreign entity
  • Small proprietary companies that prepare financial reports under the direction of shareholders or ASIC
  • Small proprietary companies that have at least one Crowd Sourced Funding shareholder during the financial year

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