In short the role of the liquidator is to preside over the orderly winding up of the company. In this regard the powers of the directors are suspended and the Liquidator is the only person who has authority to act on the behalf of the company. The liquidator will oversee that there is a fair and equitable distribution of the company’s assets (which must be in accordance with the Corporations Act). The liquidator will investigate the affairs of the company so as to ensure that no creditor has received an unfair advantages over other creditors. If such a case is found the liquidator, in certain cases, can claw back some payments made shortly before liquidation Will any Payments Made Before Liquidation be “clawed back” by the Liquidator?.
The role of a liquidator is to conduct the company liquidation what is a company liquidation? and will be responsible for:
- To act in an independent and> unbiased manner;
- winding up the affairs of the company;
- To realise and distribute the assets of the company;
- To distribute any surplus monies to the creditors of the company (after the costs and expenses of the liquidation have been paid);
- To investigate the affairs of the company and report any wrong doings such as potential claims for preferential payments, insolvent trading what is insolvent trading?; and
- The liquidator’s findings must be reported to creditors and the Australian Securities and Investments Commission. After clearance has been received by ASIC, the liquidator may proceed to finalise the liquidation.
A liquidator must be entirely independent and free of any conflict. They must always act in an impartial manner. Before a liquidator can accept an appointment, they must prepare and then distribute to creditors (after they have been appointed) a declaration of independence, relevant relationship and indemnities (DIRRI). The DIRRI must set out any known relationships with the company or the company’s directors and shareholders. It must also set out any up-front payments or indemnities received from the company or its directors andor shareholders to conduct the liquidation.
If it is later found that a liquidator was not independent or has not acted in an impartial and unbiased manner, then they may be removed by a court order. An actual lack of independence will be regarded as a very serious matter by the courts, particularly if the liquidator fails to properly investigate a director or has preferred or assisted the director in any way.
To realise and sell company assets
The liquidator has a duty to firstly identify and then protect the assets of the company. The liquidator will need to make enquiries to ensure that the company’s assets are not subject to finance. If they are subject to finance, then only the finance company will have authority to deal with those assets. The liquidator also has a duty to sell the assets for their market value.
To distribute any surplus monies to the creditors of the company
The liquidator will first pay for the costs and expenses of the liquidation. The costs and expenses of the liquidation will include the liquidator’s remuneration. Other costs and expenses may include:
- Statutory filing fees with ASIC;
- Legal fees; and
- Other expenses incurred in the winding up of the company.
To investigate the affairs of the company
The liquidator has a statutory duty to investigate the affairs of the company. The investigation must include a review of the transactions which the company entered into within a set time period prior to liquidation. The time period to be reviewed will depend on whether the transaction was entered into with a creditor which was related to the director or not. If the creditor is related to the director then the time period to be reviewed will be 4 years prior to liquidation. If the creditor is not related to the director, then the time period to be reviewed will only be six months prior to liquidation.
The liquidator will also need to investigate and
- If the company traded whilst it was insolvent;
- If the directors breached any of their statutory duties to the company;
- If the company entered into any uncommercial transactions; and
- If the company entered into any unfair director related transactions.
If you would like to better understand the role of 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.