Here at ACL we have broken down the long and complicated process of a liquidation into 14 easy steps.
- Liquidator to lodge documents with the Australian Securities and Investments Commission to commence the liquidation.
- Liquidator to issue letters to all stakeholders of a company informing them of the appointment.
- Director to fill in and return a Report on Company Activities and Property, and deliver all books and records.
- Liquidator to issue an Initial Report to Creditors within 10 business days after the date of their appointment as a liquidator.
- Liquidator to issue a Statutory Report to Creditors within 3 months after the date of their appointment as a liquidator.
- Liquidator to lodge returns with the Australian Taxation Office for transactions entered into by the company.
- Liquidator to realise all available assets of the company.
- Liquidator to undertake investigations into the affairs of the company.
- Liquidator to lodge a Report under Section 533 of the Corporations Act 2001 with the Australian Securities and Investments Commission (ASIC) detailing the liquidator’s findings.
- Liquidator to declare a dividend if there are sufficient funds available.
- Liquidator to obtain clearance from the Australian Securities and Investments Commission to finalise the liquidation.
- Liquidator to issue a Final Report to Creditors.
- Liquidator to lodge final return with the ASIC.
- Liquidator to write to the director and the Australian Taxation Office informing them of the finalisation of the liquidation.
If you would like to know more about the steps involved in liquidating a company, please call Australian Company Liquidations on 1800 981 070.
The appointment of a liquidator will have significant effects on unsecured creditors can be varied and also complicated. In most situations the creditor will lose the ability to recover any outstanding direct from the company. The unsecured creditor will need to register its claim with the appointed liquidator. Claims are registered thorough a proof of debt (form 535).
We examine other ways that a liquidation may affect unsecured creditors, these may include the following:
Preferential payments
If any unsecured creditor has received a payment which the liquidator considers to be “preferential” may be clawed back under certain circumstances. The starting point is for the liquidator to examine what payments the company made within 6 months of the liquidation (if it was a voluntary liquidation) or within 6 months of a winding up application being filed in court (if it was a court winding up). Although the liquidator can examine transactions up to 4 years if the payment was made to a related party (ie a person or company related).
Other issues for the liquidator to prove are:
That the creditor was preferred to other creditors as they received more than they would receive through the liquidation of the company;
That the company was insolvent (ie the company was unable to pay its debts as and when they fell due) when it made the payment.
Goods secured by PPSR charge
If any creditor holds security over goods which has been registered under the Personal Property Securities Register, then that creditor may be able to recover these goods from the liquidator.
Court action
Once a company has been wound up (either on a voluntary or compulsory basis) a creditor is unable to commence any fresh litigation against the company. The reasoning behind this is to prevent a company in liquidation being subjected to actions that are expensive and, therefore, carried on at the expense of other creditors of the company. A creditor wanting to commence litigation against a company that is in liquidation will need leave (or approval) of the court (section 500 (2) of the Corporations Act. A court is more likely to grant that leave, if for example the purpose of the litigation is to claim against an insurance policy held by the company.
If you would like to understand the effect of liquidation on unsecured creditors, please call Australian Company Liquidators on 1800 981 070.
The cost will depend on firstly whether it is an insolvent or solvent liquidation. Secondly, the cost will depend on the complexities involved, ie
- Is it still trading?
- Can the business as a whole be sold, or do the assets need to be sold individually (i.e. on a break up basis)
If the company has ceased to trade some-time ago we can offer a fixed price director contribution, i.e. a contribution towards the cost of the liquidation.
If your company is insolvent (i.e. unable to pay its debts as and when they fall due) you as a company director should take active steps to have it placed into liquidation as an orderly winding up can occur. In these circumstances you have two (2) choices:
- The most proactive approach would be for the directors and shareholders to appoint a liquidator. This is known as a Creditors Voluntary Liquidation What is a Creditors Voluntary Liquidation? If you chose this method, you can appoint a Registered Liquidator of your choosing.
- The other method for a company to be placed into liquidation is by a Court Order. The court may make the order based on an application by the Company, (ie a director, a shareholder) or a creditor. If you allow a creditor to make the application to court (usually after a Statutory Demand What is a Statutory Demand? has expired), the creditor will in most cases select the Official Liquidator of their choosing (in other words you won’t have any control over the process)
A company liquidation is only necessary if the company has doesn’t have sufficient assets to pay all of its creditors in full, i.e. it is insolvent How do I know if my company is insolvent?. If your company has sufficient assets to pay all creditors, then you can simply pay them in full and apply to the Australian Securities and Investments Commission for the company to be de-registered.
There may be other reasons to appoint a Liquidator and these may include:
A dispute with your other directors and or shareholders and effective decisions cannot be made (i.e. you need a Provisional Liquidator appointed What is a Provisional Liquidator
The company has made significant taxable gains and you want to distribute these taxable gains prior to the company being deregistration (i.e. you need a solvent liquidation)
A company liquidation is the process to orderly wind-up and to bring to an end the business affairs of a company which has been incorporated under by the Corporations Act. A liquidation is only necessary for a company, ie a Pty Limited or Limited company. If you have operated your business as a “sole trader” and you are insolvent and want to wind up your business affairs you may need to consider personal bankruptcy. A company liquidation should not be confused with personal bankruptcy.
A company liquidation can also be referred to a company winding up.
The liquidation process must be handled by a Registered Liquidator who is licensed by the Australian Securities and Investments Commission. The Registered Liquidator must follow strict procedures as set out in the Australian Corporations Act and must be independent and free of any biasness.
Typically company liquidation is initiated when the company is insolvent.
The role of the liquidator is to gather in and sell the company’s assets and distribute the proceeds to creditors (after the costs of the liquidation have been meet). If there is a shortfall in available assets then regrettably the creditors will get paid or they will get paid on a pro-rata basis.
Step 1 – make an assessment as to whether my company is solvent or insolvent
The decision to place your company into voluntary liquidation What is a Company Liquidation? should not be taken lightly. Firstly, you need to make a thorough assessment as to whether it is solvent or insolvent (it is insolvent if your company is unable to pay its bills as and when they fall due). We offer a professional service to help company directors ascertain if their company is solvent or insolvent. Getting a professional and independent assessment is critical as we often find company directors are under a significant amount of pressure and cannot see the situation for what it is.
The consequences of continuing to trade whilst your company is insolvent what are the consequences of trading whilst insolvent? can be catastrophe. Take a few minutes to read our article on what you should look out for to determine if your company is insolvent How do I know if my company is insolvent?.
Step 2 – decide the type of liquidation – Voluntary Liquidation or Compulsory Liquidation
So, if you have established that your company is insolvent, the next step is to decide on the type of liquidation. You can choose either a Voluntary Liquidation or Compulsory Liquidation.
Voluntary Liquidation
A voluntary liquidation is where the directors and shareholders both nominate a registered liquidator to accept the appointment for the winding up of the company. This is the most expeditious way to windup and a company. As soon as you nominate a liquidator, the appointment can be made very quickly thereafter.
Compulsory Liquidation
A compulsory winding up is where a creditor approaches the court for the company to be wound up. This process takes much longer and driven by the creditor who petitions the court. As such the creditor or the court will nominate the liquidation.
If you would like to discuss when you should place your company into liquidation, please call Australian Company Liquidators on 1800 981 070.
The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 981 070 for a free initial consultation to discuss your specific issues.
The purpose of a voluntary company liquidation what is a company liquidation? is to legally wind up the affairs of a company that is insolvent how do I know if my company is insolvent?. If the company is unable to pay all creditors 100 cents in the dollar, then a liquidator should be appointed.
Where there are insufficient funds available to pay all creditors 100 cents in the dollar, the liquidator will be responsible for paying those debts in a fair and equitable way. The Corporations Act sets out the order in which assets of a company in liquidation are to be distributed. If there are insufficient assets available to the liquidator, then unfortunately not all creditors of the company will get paid.
The liquidator will also carry out detailed investigations into the affairs of the company and report their findings to creditors and the Australian Securities and Investments Commission. The purpose of the investigations are to:
- To identify if the company made any unfair preferential payments Will any Payments Made Before Liquidation be “clawed back” by the Liquidator to creditors in the last six months leading up to the liquidation;
- To identify if the company entered into any uncommercial transactions Will any Payments Made Before Liquidation be “clawed back” by the Liquidator;
- To identify if the company entered into any unreasonable director related transactions Will any Payments Made Before Liquidation be “clawed back” by the Liquidator;
The liquidator will also need to file a detailed and confidential report with the Australian Securities and Investments Commission (if the company is unable to pay a dividend of more than 50 cents in every dollar owed to creditors). This report will need to detail if the directors of the company breached any of their duties what duties to directors owe to a company?.
If you would like to discuss the purpose of placing your company into liquidation, please call Australian Company Liquidators on 1800 981 070.
The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 981 070 for a free initial consultation to discuss your specific issues.
Who can appoint a liquidator depends on what type of liquidation is contemplated.
Voluntary Liquidation by the Company
A voluntary liquidation is initiated by the company itself (by the directors and shareholders). The directors and shareholders can nominate and appoint a liquidator of their choosing. A voluntary liquidation is also known as a Creditors Voluntary Liquidation. The reference to “creditors” is because the creditors can replace the liquidator appointed by the company at the first meeting of creditors.
Compulsory Winding up by the Court
A compulsory winding up of a company is ordered by a Court but is usually initiated by a creditor who is owed more than the statutory minimum debt what is the statutory minimum debt to wind up a company, but it can also be initiated by the Australian Securities and Investments Commission under certain circumstances. Under either scenario the creditor or ASIC will nominate a liquidator. If there has been no nomination by the creditor or ASIC, then the court will nominate a liquidator from its panel of liquidators. If the nominated liquidator consents to the appointment (by signing a consent to act), then they will be formally appointed by the Court to perform the winding up.
It is worthy to note, that once a winding up application has been filed in court, the company cannot be wound up on a voluntary basis.
If you would like to understand more about who can appoint a liquidator, please call Australian Company Liquidators on 1800 981 070.
The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 981 070 for a free initial consultation to discuss your specific issues.
The appointment of a liquidator will have significant effects on the company. The effects will include the following:
- The company’s directors and employees will not be able to make any decisions on behalf of the company. The appointed liquidator is the only person who can make decisions on behalf of the company;
- In most situations, the company will cease normal trading activities immediately unless the company can be sold as a going concern (ie the business has some commercial value as a going concern);
- If the liquidator makes the decision to cease trading activities immediately, then the liquidator would normally:
a. Freeze the company’s bank account;
b. Terminate the employees; and then
c. Identify and secure the company’s assets. Once the liquidator has confirmed that the assets are owned by the company (and not under finance), then the liquidator will make arrangements for them to be valued and then sold.
- Any legal proceedings against the company will be automatically stayed without leave of the court.
If you would like to understand the effect of liquidation on the company, please call Australian Company Liquidators on 1800 981 070.
The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 981 070 for a free initial consultation to discuss your specific issues.