What Are Liquidated Assets?

The term “liquidated assets” refers to everything of value that is sold off to pay creditors while a business is liquidating or restructuring. To pay off the company’s debts, the money obtained from the asset sale is often distributed to the creditors. In Australia, this is the most common business proceeding before liquidation. Businesses can sell their assets, which can include investments, vehicles, machinery, raw materials, and real estate.

What types of assets can be liquidated?

The simplest technique to identify assets that can be liquidated is to consider tangible and intangible goods with monetary value. Here is a complete list of frequently liquidated assets:

• Real Estate: This includes unoccupied land as well as housing, commercial, or rural property.
• Motor vehicles: Vehicles for the transportation of goods in factories, on and off the road, and with big loads.
• Equipment: Computers and software, phones, copiers, and other electronic devices such as audio equipment
• Machinery: Hardware, robotics, heavy machinery, appliances, and more.
• Furniture: Furniture such as tables, chairs, cabinets, couches, wall art, lights, and other accessories.
• Inventory: Any products, components, goods, or raw materials involved in the manufacturing process.
• Essentials: Office supplies, kitchen essentials, and stationery.
• Financial Securities: Securities such as stocks, bonds and mutual funds.

All assets are sold and converted to cash during the liquidation process. Even though they are considered liquid, assets like stocks and bonds are often converted into cash in order to distribute funds to shareholders and creditors more efficiently.

How do you liquidate a business asset?

It is not unusual for company assets to be sold off before liquidation. The registered liquidator will endeavour to recoup as much value in the assets as possible, in order to pay off any outstanding debts and provide payments to creditors.

If the directors are selling the assets, it is important that it is sold at a price that reflects market value. This is especially important if they sell it to someone they know, such as friends or family. Where necessary, directors should seek an independent valuation from a third party.

If you are considering liquidating your assets to pay off your company’s debts, it may be time for you to get in touch with an insolvency practitioner.

Here at Australian Company Liquidations, our Registered Liquidator can provide qualified and confidential advice regarding your company’s assets and assess your financial situation. Call our team now on 1800 981 070. Our toll-free line is open, 24/7 including weekends.

Why is it important to keep good relationships with creditors

Maintaining a positive working relationship with creditors is essential to a company’s success. Failure to do so might result in unmanageable debt and the unwelcome prospect of liquidation. Knowing how to deal with creditors is a skill that can be learned fast, and we’ll look at a variety of reasons why it may be the difference between success and failure.

Maintaining a balance between when you have to pay creditors and when you get payment from your customers is critical to your company’s cash flow. Having a solid rapport with your creditors may allow you to extend credit beyond the amount owed, allowing you to lower the amount of working capital needed to run your firm. This is especially important during times of expansion, when there are more funds available to take advantage of economic prospects.

In times of financial trouble, the benefits of having a trustworthy connection are sometimes most apparent. One of the most obvious signs that a corporation is trading whilst insolvent is the inability to pay bills on time or repeatedly paying them late. Creditors may be worried that your business is going to be put into voluntary administration or even liquidation.

Good communication with creditors is critical, but our focus here will be on how to properly handle creditors during times of financial distress. If you are unable to pay your invoices or financial obligations, you should contact creditors as soon as possible rather than waiting for them to contact you after the lack of payment becomes a problem and escalates further.

Implementing the communication tactics discussed above lays the groundwork for productive negotiation with creditors. Before contacting a creditor about an existing debt, you should first figure out how much the debt is and how much you can afford to pay over time.

If you would like help managing your creditors then contact Australian Company Liquidations. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking expert advice. Call us on 1800 981 070.

What is a Director Loan or Drawings Account?

A Director Loans or Drawings account shows an amount owed by a director to the company.

This account typically appears as a company asset in the form of a Director Loan Account on the company’s balance sheet.

How does this occur?

 At Australian Company Liquidations, we typically encounter the following scenarios when dealing with Director Loan accounts:

• The company’s accountant has advised that tax can be minimised to save cash flow by paying directors a small salary, then drawing further payments by putting it to a “loan account”;
• A director has simply been drawing funds from the company to act effectively as their salary, but the payments have been reconciled to the Director Drawings or Director Loans in their financial accounts;
• The company has genuinely loaned money to the director

What happens to the Director Loan Account if my company enters liquidation?

 If the company enters any form of insolvency process such as liquidation, then the loan is an asset recoverable by the Liquidator. This can result in the Liquidator commencing legal action against the director to recover the loan.

How can I prevent this?

• Repay any debts that you personally owe to the company
• Account for your obligations regarding PAYG tax when you take your salary and ensure you stay compliant with the Australian Taxation Office’s requirements
• Discuss any concerns that you may have with an accountant or Registered Liquidator, who can point you in the right direction

Here at Australian Company Liquidations we have a team of accountants and liquidators who can provide you with confidential and tailored advice to suit the needs of your business. Be aware that Director Loans accounts may cause issues if the loan is not repaid and the company is subsequently placed in liquidation. Speak to our friendly team on 1800 981 070 today!

Company directors fear liquidation, but often, voluntary liquidation presents the most beneficial financial option in the long run. If your company is insolvent, making the decision to liquidate can relieve stress, reduce your potential personal liabilities as director and neatly wrap up the company’s operations, leaving you free to start afresh.

Voluntary liquidation happens when an insolvent company chooses to cease operating rather than being forced to by its creditors. The main benefit of going into voluntary liquidation is that you get to choose your liquidator. Also, voluntary liquidation is a simpler process, meaning that your case can start immediately and be completed within a shorter amount of time. Involuntary liquidation (otherwise known as a court liquidation), on the other hand, can take a lot longer to finalise and can involve a number of court appearances with creditors.

Company directors need to be constantly aware of their company’s solvency. Australian Company Liquidations share their three major warning signs which indicate your company may be headed towards insolvency.

1. Shortage of Cash Flow
If you are finding that your company has been suffering from a fairly consistent shortage of cash flow, then your company may be heading towards insolvency.

2. Drops in Profit
Poor financial metrics are another reason many companies are going into voluntary liquidation. A lack of profits can also mean that the company is heading towards insolvency or has already become insolvent.

3. Poor Management and a Failure To Respond
One of the main reasons that voluntary liquidation has become so prevalent is that business owners are often focusing on the symptoms and not seeking out the cause of their financial distress. Focusing on the next ‘big job’ may ease the pressure in the short time, but ignoring the larger picture means that it is often too late to fix the situation when it becomes more apparent. In order to avoid insolvency, businesses need to be proactive rather than reactive.

By choosing voluntary liquidation, you are essentially placing the stress of dealing with an insolvent company in the hands of the liquidators. Your appointed liquidator will become the point of contact for all creditors and will deal with selling your assets and distributing the funds to creditors, leaving you debt and stress free!

If you think your company has reached the point where voluntary liquidation is your most viable outcome, give Australian Company Liquidations a call on 1800 981 070.

The Top 5 Reasons People Choose Voluntary Liquidation

The idea of liquidation might be alarming. It’s terrible to think of losing all you’ve fought so hard for. You are unsure of what to anticipate. You probably don’t know what to ask to determine whether liquidation will benefit you. Many of our clients felt before consulting with us and deciding to liquidate. But once they choose, most of our clients believe that liquidation enables them to move on and enhance their lives.

So, here are the top five reasons why people opt for Voluntary Liquidation.

Remove the stress of continuous creditor pestering right away.

Creditors will continue to harass you for payment if you do not choose to liquidate voluntarily. Calls won’t stop coming in. Because going to court is a lengthy process and costs a significant amount of money; this might drag on for days or even months. You should be aware that once your company enters liquidation, you are no longer required to take calls or handle payment requests.

Direct your creditors’ attention away from you and toward the liquidator’s office.

The first action a liquidator takes is to inform the creditors in writing that the business is in liquidation and that they must contact the liquidator’s office. Liquidators notify creditors of the timelines and results they can anticipate from the liquidator. From then on, any attention to the company is directed to the liquidator and away from you. Creditors may contact only the liquidator for information. You are no longer required to respond to nonstop requests for money.

All legal proceedings end immediately upon the appointment of a liquidator.

You will be required to pay money for legal fees if you don’t liquidate and the company is a party to litigation or claims. However, civil procedures are automatically halted when a business is put into liquidation and cannot be resumed without the court’s permission. As a result, no more money will be spent on legal action.

Employees will benefit from the company’s liquidation.

If you have been unable to pay your employees’ wages and entitlements, you should be aware that when a company is placed into liquidation, those qualified employees can claim and collect entitlements under the Fair Entitlements Guarantee Scheme. The plan is not viable, and you might have to deal with unhappy employees if the business is not liquidated.

Being in a position to improve your health and personal relationships and get on with life

Voluntary liquidation relieves stress and puts an end to phone calls. You’ll be able to concentrate on what matters most: your health and social connections. You transfer your responsibility to the liquidator when you declare your business to be liquidated. You should get on with your life and make an income as soon as possible while taking care of your health and personal relationships and putting the company’s problems behind you.

Our advice at Australian Company Liquidations is tailored to your particular situation. We’ll review formal and informal choices with you and discuss which is best for you. Our objective is to arm you with unbiased information so you can make the best choice for yourself and your family in inevitably challenging circumstances. Call us at 1800 981 070 right now.

When a Company Files for Liquidation, What Happens to its Employees? (2022 Update)

Employees are among the most affected parties when a company goes into liquidation. Along with the potential loss of their job, receiving payment for previously completed work is also a paramount concern. It’s essential for employees to always know what their legal rights are and what steps they can take or claims they may be entitled to.

Rights of Employees

 Employees typically lose their jobs when a company is liquidated. Employees have legal rights to unpaid wages, retirement, leave, and layoff. The primary challenge for the employees is that expenditures and fees associated with the liquidation process must be covered before using the proceeds from asset collection and sales. Priority creditors come next, leaving little to no money for employee benefits in many cases. Unfortunately, this results in many employees not receiving their entitlements in most cases. The Australian government established the Fair Entitlements Guarantee to solve this problem.

Claiming under the Fair Entitlements Guarantee (FEG)

 In Australia, a system known as the Fair Entitlements Guarantee (FEG), which the federal government runs, offers a last-resort safety net for employees. Eligible workers may be able to file claims through the FEG for unpaid pay, unpaid annual leave, and other rights. If funds are available, employees are entitled to receive payment from the liquidation proceeds.

What can employees claim under the FEG?

 The following items may be claimed under the FEG by eligible employees:

• Wages are unpaid for up to 13 weeks.
• Both annual and long-service leaves.
• Up to five weeks worth of compensation in lieu of notice
• If the employee’s contract (or governing document) calls for it, redundancy compensation may be given for up to four weeks of service per year or on a pro-rata basis for fewer than a year.

The FEG prohibits employees from claiming the following, even though several are specified as employee rights in the event of a bankruptcy or liquidation:

• Reimbursement payments, as well as irregular or one-time payments
• Bonus payments or one-time or inconsistent commissions are covered.

How do employees submit a claim through FEG?

 A claim must be filed within a year of the termination of employment or liquidation to be considered valid. Claimants can submit a claim by applying to FEG Online Services, where they will be required to provide proof of their citizenship status. Then, using the online service, all relevant documentation can be submitted. Claimants may be required to submit supporting documents in addition to proof of citizenship, such as letters of appointment or employment contracts, pay stubs, PAYG summaries, bank statements, proof of wage rates, and notes of termination.

Contact Australian Company Liquidations if you would like more information about company liquidations. We are registered business liquidators who provide a free 24/7 insolvency hotline for Australian directors looking for expert help. Call us right now at 1800 981 070.

A phoenix company is when a company is closed down but the business is transferred to a new company and continues to trade using the same or a similar name as before. Typically the assets owned by the old company are also transferred to the new company for no or insufficient consideration. The new company has therefore received the business and assets owned by the old company illegally and this type of arrangement is known as a Phoenix Company.

What this does is to leave all the unpaid debts in the old company, meaning that suppliers and creditors will be left empty-handed. In most cases the old company is then liquidated or just abandoned.

Phoenix activity is illegal. Any director who engages in any kind of illegal phoenix activity may face serious consequences.
It is important to note that not all companies which are placed into liquidation are the result of illegal phoenix activity so it is important to be able to recognise key characteristics of a phoenix company:

• The underlying business of the old company remains the same and is transferred into a new company controlled by parties who are associated with those from the previous company.
• The creditors of the old company are left unpaid. and Insufficient or no consideration was paid for the transferred assets.

What is the impact of illegal phoenix activity?

Whilst a phoenix company may seem like an ideal way to get out of paying for company debts, it bears serious consequences. Company directors or parties who engage in this activity will face serious consequences. These may include:

• A director banning order from ASIC.
• A claim for insolvent trading; and
• A claim for compensation for the value of the assets transferred.

Customers who remain unpaid may also place the new company on COD or perhaps even refuse to supply goods or services to the new company.
If your company is insolvent or likely to become insolvent, then act immediately by seeking the help from professionals. Australian Company Liquidations can assist you in shutting down your failed business the right way. Call us on 1800 981 070 for a FREE initial consultation now.

What is a Wind-Up Application?

A wind-up application can be filed in court after a creditors’ statutory demand has been issued and 21 days has lapsed and the debt remains unpaid. The wind-up application requires the company to appear in court on a date specified in the notice. The notice will be served at the company’s registered office.

Can a Wind-up Application be set aside?

You may be able to challenge a wind-up application in a number of different ways. A successful opposition to a wind-up application will result in the court not ordering to wind up your company. While receiving a wind-up application is a very serious matter, there are several options available for your company to oppose the wind-up application which we have outlined below.

Pay off the debt in full

The best option if you can afford to do so is to pay off the debt in full before the winding up application is heard in court. Alternatively, you may be able to negotiate a repayment plan, however ,you may need to offer security for the payment plan. The risk here is that another creditor may approach the court and substitute in as a creditor and request that the company be wound-up.

Evidence of solvency

If you believe your company is solvent and the debt can be paid within a short period of time (i.e. the company is only suffering short term liquidity), then you will need to obtain expert evidence to prove that your company is solvent. If the court agrees with the expert’s report then it may set aside the winding up application.

Prove creditors have a better chance of repayment

Your expert would need to provide that creditors would receive a better return if the company is allowed to continue to trade as opposed to being wound up.

Voluntary Administration

Finally you may appoint a voluntary administrator. It is important to note that appointing a voluntary administrator will not cancel a winding-up application and the voluntary administrator will most likely need to provide the court with evidence that creditors will receive a better return compared to if the company is immediately wound-up.

Once a wind-up application has been filled in court you may only have approximately 21 – 28 days before the court hearing date (this may vary from court to court). If you do not take action during this time, the court will most likely order for your company to be wound-up. The earlier you seek professional advice the better your chances are of opposing the wind-up application. If you have received a wind-up application and would like assistance, call our professional consultants now on 1800 981 070. Our toll-free line is open, 24/7 including weekends.

As business owners, it is important to be aware of the solvency of other businesses that you trade with, such as suppliers, customers and co-investors. If you are concerned about the solvency of your trading partners you can check on various government websites to check their status.

1) Insolvencynotices.asic.gov.au

This website is run by the Australian Securities and Investments Commission (ASIC) and it is compulsory for all liquidators and voluntary administrators to publish notices on this website.

It is free for anyone to search this website and you don’t need to register. You can search by the company’s name or it’s A.C.N. if a positive search result is found it will display the name of the liquidator or administrator and the date of their appointment.

If the company has been placed into liquidation or administration, you can then contact the liquidator or the administrator’s office for more information and to record your claim.

2) asic.gov.au

This website is also run by the ASIC, but unlike the insolvency notices website it contains more general information about the ASIC.

This website will also allow you to search to see if the company is under external administration, but it will not tell you who the liquidator or voluntary administrator is.

To perform a more detailed search, you will need to pay a fee and register with a third party search company.

If you would like more information on company liquidations, then please contact Australian Company Liquidations. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking expert advice. Please call us on 1800 981 070 now.

How does the Business Liquidation Process work? (updated guide for 2022)

Why choose liquidation for your company?

A company can go into liquidation when it is declared insolvent, which means it can’t pay its debts on time. This can happen voluntarily or involuntarily. Some companies may find that liquidating as an exit plan is the best course of action if they are not generating enough revenue to sustain the business. For example, if you cannot keep up with your competitors, if your industry is too saturated, or if external circumstances have affected your ability to run the business. If this is the case, you can choose to voluntarily liquidate your business to close it down.

What do you do when you want to liquidate your business?

Depending on the structure of your company, several processes are required to liquidate it. You would take different courses of action if you are operating a proprietary limited company compared to running a business as a sole trader.

It would be wise to consult a registered liquidator if you want to liquidate a company, as there are certain procedures that must be abided by.

What are the types of liquidation?

• Court-ordered liquidation

This is when an application for your company to be liquidated has been submitted to the court by your creditors. This is so that they can recoup some payments in the debts that you owe to them, through a court-initiated liquidation. The court then chooses an official liquidator to handle the company liquidation.

• Creditors’ voluntary liquidation

The parties that the firm owes money to vote on whether or not to liquidate it in a creditors’ voluntary liquidation.

• Members’ voluntary liquidation

Members’ voluntary liquidations usually occur when the directors of a company that can still pay its debts has decided to stop doing business. This process allows them to officially close down the business and following the required procedures.

What happens after the liquidator is appointed?

The process of liquidation, including the selection of a liquidator, can be complex and subject to stringent legal restrictions. Once the liquidator is appointed, he or she is given complete authority over all business matters. But rather than being responsible to the shareholders, the liquidator’s primary responsibility is to the creditors. The liquidator will gather the company’s assets and sell them. He or she will also look into the company’s finances and, if necessary, let creditors know what he or she finds.

The liquidator will initially use the revenues to settle the costs of the liquidation and secured creditors before distributing them to other creditors when the assets have been realised. Then, along with paying employees, the priority creditors will also be compensated. The liquidator will make sure that any money is distributed to shareholders before being given to unsecured creditors. The liquidator then submits a deregistration request for the company.

If your company is insolvent or likely to become insolvent, then act immediately by seeking the help from professionals. Australian Company Liquidations can assist you in shutting down your failed business the right way. Call us on 1800 981 070 for a FREE initial consultation now.