Company Liquidation: The Process of Closing Down Your Company
Deciding to close a business is a difficult decision but often can save people from insolvency. One of the main concerns that an individual has when closing their business is what will happen to the money and how to pay their debts effectively. Not every business is insolvent, but every business has to endure company liquidation once it closes its doors. Generally, people can appoint a liquidator to help distribute the assets or find ways to pay off the debts.
There are typically three kinds of liquidations. Court-ordered liquidations and creditors’ voluntary liquidations apply to insolvent companies. Solvent companies can proceed with members’ voluntary liquidation.
No matter the situation, company liquidation occurs in four steps:
1. Liquidation costs
2. Secured creditors
3. Priority unsecured creditors
4. Unsecured creditors
For secured creditors, this typically handles mortgages or other charges. In Section 12 of the Personal Property Securities Act of 2009, secured creditors are those with a security interest over some or all the company’s assets. These individuals have to be paid before priority unsecured creditors and unsecured creditors.
Priority unsecured creditors such as employees or trading partners are paid after the necessary debts the company owes. Finally, unsecured creditors will be paid last, at times in the form of dividends.
By following this process of liquidating the company, people will ensure that they pay off their debts and allocate all their assets. After liquidation completion, a company can genuinely close its doors and financially release any past balances.
During these uncertain times, stay informed on the latest updates by subscribing to our newsletter. If your business is struggling from the impact of the pandemic or is looking for more information on company liquidations, please contact Australian Company Liquidations on 1800 731 155. We are registered company liquidators who offer a FREE 24/7 insolvency hotline for Australian directors seeking expert advice.