Before you decide to put a company into liquidation it is best that you firstly understand what is involved with a company liquidation. what is a company liquidation.
In brief, a company liquidation is the process of winding up a company’s affairs and having a liquidator appointed to the company. The liquidator will first identify and then realise the company’s assets. The assets may be sold at auction or by public tender (the method of sale will depend on the nature andvalue of the assets). Once the assets have been sold, the liquidator will then report these results andthe findings of their investigations into the affairs of the company to creditors. The liquidator will also hold several meetings of creditors How many meetings of creditors will a liquidator hold during the liquidation process. If the liquidator is only able to distribute 50 cents in the dollar (or less) to creditors then a confidential report must be filed with the Australian Securities and Investments Commission with section 533 of the Corporations Act What reports must a liquidator lodge with ASIC?
How is a liquidator appointed?
In short there are two ways a company can be placed into liquidation, either on a “voluntary” basis or a “forced” basis.
A liquidator can be appointed by the directors and shareholders of the company on a voluntary basis. This is known as a Creditors Voluntary Liquidation. The process must begin by the directors holding a meeting of the board of directors. If the majority of directors approve of the liquidation, then the board of directors can nominate a liquidator and call a meeting of the members (shareholders). The members (shareholders) must then pass the resolution for the company to be wound up. This resolution is a special resolution, so it needs to be passed by 75% of the members present at the meeting.
The benefit of a voluntary liquidation is that it is quick andcost effective. The directors and shareholders can also select the liquidator, although it needs to be noted that creditors have the power to replace the nominated liquidator at the first meeting of creditors which must be held within the first 11 days of the liquidator being appointed.
The creditors can also force a compulsory winding up of the company through the courts. This is known as a Court Liquidation or Compulsory Winding Up. The most common way for a company to be wound up by the court starts with a creditor issuing a Creditors Statutory Demand what is a statutory demand. Any creditor owed $2,000 or more can issue a statutory demand. If the debt listed in the statutory demand remains unpaid 21 days after the statutory demand was issued, the company is deemed to be insolvent and the creditor can apply to court for the company to be wound up. The creditor who applies to court is known as the petitioning creditors and can nominate a liquidator of their choosing. Once a winding up application has been filed in court, the company is not able to be wound up on a voluntary basis. Therefore, if your company receives a statutory demand and cannot pay the debt set out in the demand, you should consider appointing a liquidator on a voluntary basis before the 21 day notice period expires.
If you would like to discuss how to put your company into liquidation, please call Australian Company Liquidators on 1800 981 070.
For more general information on director banning orders, call the company liquidation experts on 1800 981 070.
The information provided in this site is general in nature andshould not be relied upon for your specific circumstance. Call us on 1800 981 070 for a free initial consultation to discuss your specific issues.