What is the Purpose of a Company Liquidation?

When your company experiences financial distress, a company liquidation may be a possible option for you to consider.

Liquidation refers to the winding up of a company’s affairs. There are two types of liquidation:

1. Creditors’ Voluntary Liquidation

2. Compulsory Court Appointed Liquidation

A Creditors’ Voluntary Liquidations is when the company’s directors and shareholders decide to wind up the company’s affairs. In comparison, a Compulsory Court Appointed Liquidation is when the court orders that the company be wound up, usually upon the petition of a creditor.

But what exactly is the purpose of a liquidation?

When a company is placed into liquidation, it is the role of the liquidator to perform the following primary functions:

1. To identify and sell any assets of the company for the benefit of creditors;

2. To prepare and file a confidential report with the Australian Securities and
Investments Commission;

3. To identify and recover any preferential payments;

4. To identify and recover any uncommercial transactions; and

5. To identify and recover any unreasonable director-related transactions.

Here at Australian Company Liquidations we can help explain the purpose of a company liquidation in easy to understand terms. Call our free 24 hour insolvency hotline for assistance on 1800 981 070.