FAQs

WHAT ARE THE STEPS INVOLVED IN LIQUIDATING A COMPANY?

Here at ACL we have broken down the long and complicated process of a liquidation into 14 easy steps.

  1. Liquidator to lodge documents with the Australian Securities and Investments Commission to commence the liquidation.
  2. Liquidator to issue letters to all stakeholders of a company informing them of the appointment.
  3. Director to fill in and return a Report on Company Activities and Property, and deliver all books and records.
  4. Liquidator to issue an Initial Report to Creditors within 10 business days after the date of their appointment as a liquidator.
  5. Liquidator to issue a Statutory Report to Creditors within 3 months after the date of their appointment as a liquidator.
  6. Liquidator to lodge returns with the Australian Taxation Office for transactions entered into by the company.
  7. Liquidator to realise all available assets of the company.
  8. Liquidator to undertake investigations into the affairs of the company.
  9. 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.
  10. Liquidator to declare a dividend if there are sufficient funds available.
  11. Liquidator to obtain clearance from the Australian Securities and Investments Commission to finalise the liquidation.
  12. Liquidator to issue a Final Report to Creditors.
  13. Liquidator to lodge final return with the ASIC.
  14. 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 731 155.

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What is the effect of the liquidation on unsecured creditors?

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 731 155.

How much does it cost to voluntarily liquidate my company?

The cost will depend on firstly whether it is an insolvent or solvent liquidation. Secondly, the cost will depend on the complexities involved, ie

  1. Is it still trading?
  2. 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.

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What is the role of the liquidator?

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?.

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Why appoint a liquidator voluntarily?

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:

  1. 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.
  2. 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)

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When would I need to appoint a Liquidator?

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)

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What is a Company 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.

If you want to learn more about a company liquidation, call the company liquidation experts on 1800 731 155.

When should I place my company into liquidation?

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 731 155.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

What is the purpose of a Voluntary liquidation?

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:

  1. 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;
  2. To identify if the company entered into any uncommercial transactions Will any Payments Made Before Liquidation be “clawed back” by the Liquidator;
  3. To identify if the company entered into any unreasonable director related transactions Will any Payments Made Before Liquidation be “clawed back” by the Liquidator;
  4. 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 731 155.

    The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

    CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
    OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

Who Appoints a Liquidator to an Insolvent Company?

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 731 155.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

What is the effect of liquidation on the company?

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 731 155.

    The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

    CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
    OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

What is the Effect of Liquidation on a Secured Creditor?

secured creditor and they won’t participate in the liquidation process until they have realised their security. Instead a secured creditor will reply on their security for the repayment of their debt and will sell the asset to recoup their debt. If there is any shortfall after the sale of the asset, they can prove in the liquidation for the shortfall amount.

A secured creditor can choose to surrender their security and prove in the liquidation for their entire claim, but this is most unusual.

A secured creditor needs to be very careful when they vote a meeting of creditors in a liquidation. For the purposes of voting, a secured creditor should only claim and vote for the anticipated shortfall in their security. In their proof of debt they must disclose:

  1. the particulars of their security;
  2. the date when it was given; and
  3. estimate the value of the security and any anticipated shortfall

If the secured creditor doesn’t follow these strict rules as set out in Regulation 5.6.24 of the Corporations Act, then it must be taken that the secured creditors has surrendered their security (unless a court rules otherwise).

If you would like to understand the effect of liquidation on secured creditors we would always recommend that you obtain independent legal advice. We can make a referral to an independent legal adviser if that becomes necessary.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

What is the effect of the liquidation on unsecured creditors?

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 731 155.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

Can a company trade while in liquidation?

A liquidator may decide to trade-on a business if he or she believes that the business may be able to be sold as a going concern and a sale of the business would provide creditors with a better return. To justify the decision to trade-on the liquidator would need to do an assessment to confirm that the value of the business as a going concern would exceed the value of the assets if they were sold individually. In doing this assessment, the liquidator should determine if trading losses may be incurred whilst the business is prepared for sale or other substantial costs would need to be incurred to prepare if for sale. If trading losses are likely to be incurred, then the liquidator should notionally deducted these from the expected sale price of the business and compare the net expected sale proceeds to the break-up value of the assets. This analysis is critical because any trading losses could erode the net return to creditors. The liquidator has a duty of care to the company and to the creditors, so in order to discharge that duty a liquidator must act in the creditor’s best interests.

If the liquidator needs to trade the business for longer than 3 months (in order to sell it as a going concern) then court approval would be required.

If you would like to discuss to circumstances in which a liquidator can trade-on a business whilst the company is in liquidation, call the company liquidation experts on
1800 731 155.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

What are my obligations to the liquidator?

If you are a director of a company and it goes into liquidation (either you placed it into liquidation on a voluntary basis or the court ordered for it to be wound up) you will have obligations to the liquidator. These obligations include, but may not be an exhaustive list:

  1. To attend the first meeting of creditors;
  2. To provide a Report as to Affairs to the liquidator what is a Report as to Affairs
  3. To provide the company’s books and records to the liquidator what books andrecords will I need to deliver to the liquidator?
  4. To attend to any request from the liquidator. In this regard the director has an obligation to assist the liquidator, which may include providing information, explaining the nature of the company’s business or the nature of a transaction which the company entered into.

For this reason it is important that you select a liquidator that you believe you will be able to work with. Our registered company liquidator is professional and will work with the company directors in a co-operative manner. Call us today on 1800 731 155 if you want to discuss what may be expected of you as a company director if you place your company into liquidation.

The information provided in this site is general in nature andshould not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

What is the role of 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.

Independence

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 731 155.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

Will the company liquidation affect my personal credit rating?

If your company has been placed your company into liquidation this event will be recorded on ASIC’s database.  If one pays for a personal name search, the company liquidation will show up on the search. This listing should, however be removed when the liquidation has been completed.
 

How will this affect any application for finance?

If you have a company which is in liquidation and you need to refinance your personal assets or you are seeking additional personal finance andthe new financier is concerned about the company liquidation, then you can ask the liquidator if they would be prepared to issue a letter to state whether or not they have any objections to you obtaining additional personal finance.  A liquidator would only consent to providing this letter if they have no claim against you as the company director.  If the liquidator has a claim against the company directors then it is unlikely they would be prepared to write such a letter.
If you would like to discuss more about how a company liquidation may affect your personal credit rating, then call the Australian Company Liquidators on 1800 731 155.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

How Long Does Business Liquidation Take to Complete?

There is no set time limit within which a company liquidation should be completed. The situation will depend on the how complex the structure of the company was and what dealings it entered into prior to liquidation and whether any litigation will be necessary. If no litigation is necessary then the average sized company liquidation should be finalised within twelve (12) to eighteen (18) months. If litigation or other complex matters need to be resolved then this timeframe may be more.

Why does a company liquidation take so long to complete?

A liquidator must attend to many tasks before any company liquidation can be completed. The timeframe for some of these tasks are outside of the control of the liquidator (i.e. waiting for a clearance from ASIC). A brief summary of the common tasks a liquidator must attend to include (but not limited to):

  • To call an initial meeting of creditors;
  • To realise and distribute the assets of the company;
  • To collect the books and records of the company;
  • To conduct searches into possible assets owned by the company;
  • To open a liquidation bank account on behalf of the company and bank all monies received on behalf of the company into this account;
  • 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 all materials findings to creditors;
  • To file statutory records and statements of accounts with the Australian Securities and Investments Commission (ASIC);
  • To file a statutory report with ASIC under Section 533 of the Corporations Act.
  • To lodge Business Activity Statements with the Australian Taxation Office; and
  • Finally, before the liquidation can be finalised the liquidator must wait to receive a clearance from ASIC. Once this clearance has been received the liquidator will usually then call a final meeting of creditors and the members of the company.

What can I do to assist as a company director?

As a company director, you can assist the liquidator by delivering up the company’s books and records as quickly as possible and respond to any questions raised by the liquidator as promptly as possible.
If you would like to better understand how long a company liquidation may take, please call Australian Company Liquidators on 1800 731 155.

How do you put a company into liquidation?

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.

Voluntary Liquidation

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.

Involuntary Liquidation

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 731 155.

For more general information on director banning orders, call the company liquidation experts on 1800 731 155.
The information provided in this site is general in nature andshould not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
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If I liquidate my company will I get banned as a Director?

Generally speaking, if you have not been involved in two (2) or more company collapses within the last 7 years then it is unlikely that the Australian Securities Investment Commission (ASIC) will impose a director banning order against you. However, in more serious cases ASIC has imposed a director banning order after the director’s involvement in the first company collapse. This occurred in the case of HIH Insurance which collapsed in the early 2000s. ASIC imposed a director banning order through the court and it was found that the directors had breached their duties as directors in that they had:

  • Failed to exercise due care and diligence;
  • Failed to exercise good faith;
  • Improperly used their position as a director (i.e. abused their powers); and
  • Improperly used information they had obtained as a director.

This case is a reminder that ASIC can impose a director banning order, even if it is the director’s first involvement in a company collapses. Company directors must observe proper standards and act strictly in accordance with the law and not place their personal interests ahead of those of the company.

What happens if I receive a director banning order?

If you have received a director banning order, you will be unable to act as a company director or take part in the management of a company for the time period set out in the notice. The usual time period for a banning order is for one (1) to five (5) years, however it can be up to ten (10) years for more serious matters. A director banning order is not automatic and if you receive a notice setting out ASIC’s intention to issue such an order, you will firstly be given an opportunity to appear at a private hearing at ASIC and make submissions on the matter.

Company directors should also be aware, that if you become personally bankrupt you will automatically become ineligible to act as a company director for the time that you are bankrupt.

For more general information on director banning orders, call the company liquidation experts on 1800 731 155.
The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
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In what order will funds get disbursed in a company liquidation?

The Corporations Act (Section 556) sets out a strict order in which funds are to be disbursed in a company liquidation. The act stipulates that the following must be paid in priority before any monies can be distributed to ordinary unsecured creditors:

  1. First – any expenses incurred by the liquidator in obtaining and realising the company’s assets (this includes any costs incurred in trading on the business);
  2. Second – if the company was wound up by the Court then the petitioning creditor’s costs (i.e. the legal fees incurred in winding up the company);
  3. Third – if the company was placed into Voluntary Administration prior to liquidation then any expenses incurred by a Voluntary Administrator;
  4. Fourth – if the company was wound up by the Court then any costs incurred to prepare a Report as to Affairs for the company;
  5. Fifth – if the company was wound by a resolution of the creditors following a Voluntary Administration then any costs incurred in preparing a report for the liquidator;
  6. Sixth – if ASIC orders an audit of the liquidator’s six monthly receipts and payments then the costs of that audit;
  7. Seventh – if the liquidator incurs any expenses in winding up the company then those expenses;
  8. Eighth – the liquidator’s fees;
  9. Ninth – if a committee of inspection has been appointed then the costs incurred by the committee;
  10. Tenth – employee’s wages andsuperannuation;
  11. Eveleth – any personal injury compensation;
  12. Twelfth –employee leave of absence;
  13. Thirteenth – any redundancy payments to employees;

If there is insufficient money (after the above priority payments have been made) to pay unsecured claims in full, then ordinary unsecured creditor claims will be paid on a pro-rated basis.
If you would like to discuss how the liquidator disburses funds in a liquidation, call the company liquidation experts on 1800 731 155.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

Will the employees get paid if I liquidator my company?

The Commonwealth Government set up a scheme to pay out employee entitlements in the event of a company collapse. It is known as the Fair Entitlements Guarantee (“FEG”) and information regarding the scheme is set out on their web site http://employment.gov.au/fair-entitlements-guarantee-feg. The scheme will pay for the following entitlements if the employee’s termination resulted from the company collapse:

  • Unpaid and underpaid wages (up to thirteen weeks);
  • Unpaid annual leave;
  • Unpaid long service leave;
  • Unpaid pay in lieu of notice (up to five weeks);
  • Unpaid capped redundancy pay (up to four weeks per year of service).

The scheme is a discretionary scheme and accordingly your entitlements are not be guaranteed FEG.
The FEG scheme does not cover unpaid superannuation and employees should be aware that the scheme will not pay out their entitlements if they resign after the appointment of a liquidator or after the appointment of a Voluntary Administrator. The FEG scheme will only respond if the employee’s employment comes to an end by the company terminating the contract of employment.
If you would like to discuss how the FEG scheme may be applied for your company liquidation, call the company liquidation experts on 1800 731 155.

The information provided in this site is general in nature andshould not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

Can I become personally liable for company debts?

As a company director you can only become personally liable for company debts in the following scenarios:

  1. You have provided a personal guarantee to an individual creditor (or trade supplier);
  2. The Court declares that you continued to trade the company whilst it was insolvent; or
  3. You did not complete and lodge your Business Activity Statements with the ATO within 3 months of their due dates.

Personal guarantees

If you have provided a personal guarantee to a trade supplier or other supplier and the company did not pay the amount due, then the holder of the guarantee can enforce the personal guarantee. If this occurs you will need to pay the debt personally.
If you have placed your company into liquidation or the court has wound up your company, the creditor holding the personal guarantee does not need to wait to see if their debt will be paid by the liquidation of the company assets. If you have provided a personal guarantee andyour company is wound up it is best that you try and reach an arrangement with the creditor who holds the personal guarantee before they commence legal action to collect the debt.

Insolvent Trading

Insolvent trading can only be acted upon by a company liquidator. A director of a company can only be liable for insolvent trading (our Insolvent Trading page) if the company was insolvent when a debt was incurred. Liquidators have an obligation to review the books and records of the company to form a view as to whether the company traded whilst it was insolvent before it was placed into liquidation. Liquidators must report their findings to the Australian Securities andInvestments Commission and to the creditors. In most cases a liquidator will require funding to commence insolvent trading proceedings. Liquidators can fund insolvent trading proceedings from company assets or special funding provided by creditors or ASIC.

ATO Directors’ Penalty Notice

The ATO can issue a company director with a penalty notice under Section 222AOE of the Income Tax Assessment Act. If you receive a Directors’ Penalty Notice from the ATO you must act promptly. You have 14 days from the time the notice was issued to do one of the following:

  1. Pay the debt in full
  2. Enter into a repayment payment with the ATO
  3. Ensure that the company has been placed into a Creditors’ Voluntary Liquidation (within the 14 day period) ( the Creditors’ Voluntary Liquidation Page)
  4. Place the company in Voluntary Administration (within the 14 day period) ( the Voluntary Administration Page)

If you have not done one of the above within 14 days of the notice being issued then you may become personally liable for the amount listed in the notice. To learn more about ATO Director Penalty Notices (click here) ( the ATO Directors’ Penalty Notice Page)

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

What are the benefits of voluntarily placing my company into liquidation?

If your company is insolvent, you have an obligation as a company director to place your company into liquidation or voluntary administration. If your company is insolvent and you do not take the appropriate steps to place your company into liquidation you may become personally liable for company debts incurred whilst the company is insolvent.
Appointing a registered liquidator will ensure that the affairs of the company are dealt with in an appropriate manner and by a suitably independent and qualified person. The liquidator will also wind up the affairs of the company in an orderly and fair way. The liquidator will pay out the funds in the correct order.

On a personal level, directors often find that placing their company into liquidation is like the release of a pressure valve. Once the company is in Liquidation, a director is free to move on with his/her life after what has often been a long andstressful battle to keep the company afloat. All enquiries from the date of Liquidation are directed to the Liquidator who becomes the sole point of contact for affected parties / creditors.
Appointing a liquidator may also have the benefit of avoiding personal liability for debts such as in the case where the ATO have issued a Directors Penalty Notice and you appointed a liquidator within the 21 day notice period. However, it is important to note that personally liability cannot be avoided where the Business Activity Statements (BAS) were not lodged with the ATO within 3 months of their due dates.

To learn more, call the registered and licensed liquidation experts at Australian Company Liquidations today on 1800 731 155.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
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LIQUIDATION DEFINED

WHAT IS A COMPANY LIQUIDATION?

A company liquidation is the legal and orderly process of winding up and bringing to an end the affairs of a company. There are two types of liquidation:

  • Creditors’ Voluntary Liquidation, which is initiated by a company’s directors or creditors on a voluntary basis; and
  • Compulsory Court Appointed Liquidation.

A liquidation is only necessary for an incorporated company (i.e. a Pty Ltd or Ltd company). If you operated as a sole-trader or partnership, other insolvency services are more appropriate; for example, bankruptcy or a debt agreement.

WHAT IS THE PURPOSE OF A LIQUIDATION?

The purpose of a voluntary liquidation is to legally wind up the affairs of an insolvent company.

The purpose of investigating a company’s financial affairs are to identify:

  • If the company made any unfair preferential payments to creditors in the last six months leading up to the liquidation;
  • If the company entered into any uncommercial transactions; and
  • If the company entered into any unreasonable director related transactions.

To learn more, call the registered liquidation advisers at Australian Company Liquidations on 1800 731 155.

WHO APPOINTS A LIQUIDATOR TO AN INSOLVENT COMPANY?

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The parties that can appoint a liquidator will depend on the type of liquidation being carried out.

Compulsory Court Wind-Up

A compulsory wind up is ordered by a Court, usually initiated by a creditor who is owed more than the statutory minimum debt. It can also be initiated by the Australian Securities and Investments Commission (ASIC).

Under both scenarios, the creditor or ASIC will nominate the liquidator. If there has been no nomination by the creditor or ASIC, the court will nominate a
liquidator from its panel of liquidators.

Creditors’ Voluntary Liquidation

A voluntary liquidation is initiated by the company itself. In such cases, the directors and shareholders can nominate and appoint a liquidator of their choosing.

If your company has been placed into a creditors’ voluntary liquidation, the licensed andexperienced liquidators at Australian Company Liquidations can help. We are registered and insured as per the requirements of ASIC, so you can rest assured knowing your case is being handled lawfully.

To learn more about our services or to simply receive free expert advice, call our friendly team today on 1800 731 155.

IN WHAT ORDER WILL FUNDS GET PAID IN A COMPANY LIQUIDATION?

INTERESTING

The Corporations Act (Section 556) sets out a strict order in which funds are to be disbursed in a company liquidation:

  1. Any expenses incurred by the liquidator in obtaining and realising the company’s assets
  2. The petitioning creditor’s costs if the company was wound up by the Court
  3. Any expenses incurred by a Voluntary Administrator if the company was placed into voluntary administration prior to liquidation
  4. Any costs incurred to prepare a report if the company was wound up by the Court
  5. Any costs incurred in preparing a report for the liquidator if the company was wound up by a resolution of the creditors following a voluntary administration
  6. If ASIC orders an audit of the liquidator’s six monthly receipts and payments then the costs of that audit
  7. The expenses incurred by the liquidator while winding up the company
  8. The liquidator’s fees
  9. The costs incurred by a committee of inspection
  10. Employee wages and superannuation
  11. Any personal injury compensation
  12. Employee leave of absence
  13. Any redundancy payments to employees.

The information provided in this site is general in nature and should not be relied upon for your specific circumstance. Call us on 1800 731 155 for a free initial consultation to discuss your specific issues.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

WHAT ARE THE BENEFITS AND COSTS OF LIQUIDATION?

WHAT ARE THE BENEFITS OF VOLUNTARY LIQUIDATION?

There are many benefits of voluntary liquidation; for example:

  1. Removing personal liability for directors. If your company is insolvent and you do not take the appropriate steps to place your company into liquidation, you may become personally liable for those company debts.
  2. Appointing a registered liquidator will ensure the affairs of the company are dealt with in an appropriate and orderly manner and by a suitably independent andqualified person.
  3. On a personal level, directors often find that placing their company into liquidation is like the release of a pressure valve. Once the company is in liquidation, the director is free to move on with his/her life after what has often been a long andstressful battle to keep the company afloat. All enquiries from the commencement date of liquidation will be directed to the liquidator who becomes the sole point of contact for all affected parties.

If you would like to learn more benefits of voluntary liquidation, call our licensed experts now on 1800 731 155.

WHAT ARE THE COSTS OF PLACING MY COMPANY INTO LIQUIDATION?

MUST READ

Australian Company Liquidations (ACL) provides the cheapest registered liquidation service in Australia — guaranteed. If you happen to find a cheaper quote from another licensed liquidator, we will happily beat it!

For a solvent company liquidation, our price starts from $2,500 (plus GST). A Creditors’ Voluntary Liquidation will cost more, but please call us for a quote as every liquidation is different.

At ACL, we usually ask for a director’s contribution if the company has no assets or we feel the assets may not be worth enough to cover the liquidation. However, if the company’s assets can be sold to fund the cost of the liquidation, it will not cost the director anything.

If your liquidation runs unexpected additional costs, we will not ask you for an additional contribution.

To make an enquiry or for a free quote, call our hotline today at 1800 731 155.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

THE LIQUIDATION PROCESS

WHEN SHOULD I PLACE MY COMPANY INTO LIQUIDATION?

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The decision to place your company into liquidation should not be taken lightly.

Firstly, you need to make a thorough assessment as to whether or not it is insolvent (note: it is insolvent if your company is unable to pay its bills as they fall due).

As a general rule, if your company is unable to pay all creditors 100 cents in the dollar, then a liquidator should be appointed.

To determine where your company falls on the solvency spectrum, take our 1 minute self assessment survey here or call our licensed and registered liquidation experts on 1800 731 155.

WHAT IS THE PROCESS OF LIQUIDATION?

Once you decide to liquidate your company, you have two choices for the wind up process:

  1. A Creditors’ Voluntary Liquidation, where you voluntarily place the company into liquidation; or
  2. A Court Appointed Liquidation, where you can wait for a creditor to wind it up through the courts.

Under a Creditors’ Voluntary Liquidation, you have the choice to appoint a liquidator of your own choosing. If you do not want to initiate the liquidation on a voluntary basis, the courts or petitioning creditor will appoint the liquidator for you.

The appointed liquidator in either cases will oversee the orderly wind up of the company’s affairs. The liquidator will sell off the company’s assets then distribute the proceeds to creditors in accordance with the Corporations Act.

To further understand the process of liquidation or to voluntary appoint a licensed liquidator for your company today, call Australian Company Liquidations today on 1800 731 155.

HOW DO YOU PUT A COMPANY INTO LIQUIDATION?

In short, a liquidation is the process of winding up a company’s affairs and appointing a liquidator to the company. There are two ways a company can be placed into liquidation; either on a voluntary or involuntary basis.

The wind up process will include:

  • The appointment of a liquidator (whether the liquidation was on a voluntary or involuntary basis will determine if the liquidator is appointed internally or externally)
  • The liquidator identifying andrealising the company’s assets
  • Selling the assets
  • The liquidator reporting these results andtheir investigative findings of the company’s financial affairs to creditors
  • The liquidator holding several meetings with creditors

To learn more about placing your company into liquidation, please call our registered expert advisers on 1800 731 155.

HOW LONG DOES A LIQUIDATION TAKE TO COMPLETE?

The length of time required for a liquidation will depend on a number of factors, including:

  • The nature of the company’s structure
  • The dealings the company entered into prior to liquidation
  • Whether any litigation will be necessary.

If no litigation is necessary, the average-sized company liquidation should be finalised within 12 to 18 months.

To learn more about the liquidation process, call our registered and experience liquidators on 1800 731 155.

WILL THE LIQUIDATOR CALL ANY MEETINGS OF CREDITORS AND WILL I HAVE TO ATTEND?

The liquidator will be required to hold the first meeting with creditors within 11 days of appointment. Thereafter, the liquidator is required to hold a creditors meeting every year during the liquidation process, unless they issue a report to the Australian Securities and Investments Commission.

Prior to the finalisation of the liquidation, the liquidator must also hold a final meeting with all creditors and> members.

As a director of a company that has entered a Creditors’ Voluntary Liquidation, you will not be required to attend any meetings unless requested by the liquidator through a written notice under Section 530A(2)(c) of the Corporations Act.

Still have a question about the role of the liquidator? Call us today on 1800 731 155.

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THE ROLE OF THE DIRECTOR

WHAT WILL BE MY OBLIGATIONS TO THE LIQUIDATOR?

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If you are a director of a company and it goes into liquidation, you have obligations to the appointed liquidator. These obligations include, but may not be
restricted to:

  • Attending the first meeting of creditors;
  • Providing a Report as to Affairs to the liquidator;
  • Providing the company’s books and records to the liquidator;
  • Attending to any request from the liquidator.

If you would like to further understand what your obligations to the liquidator will be, call Australian Company Liquidations on 1800 731 155.

WHAT IS THE ROLE OF THE LIQUIDATOR?

The role of the liquidator is to conduct and oversee the entire process of liquidation. Specifically, his/her responsibilities include:

  • Acting in an independent and unbiased manner
  • Winding up the affairs of the company in a cost effective and expeditious manner
  • Realising and distributing the assets of the company
  • Distributing any surplus monies to the company’s creditors
  • Investigating the affairs of the company andreporting any wrongdoings such as potential claims for preferential payments and insolvent trading
  • Reporting these findings to creditors andthe Australian Securities and Investments Commission (ASIC)
  • Finalising the liquidation following clearance from ASIC

To learn more about the role of the liquidator, call Australian Company Liquidations now on 1800 731 155.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
OUR HOTLINE OPERATES 24 HOURS A DAY, 7 DAYS A WEEK

THE IMPACT OF LIQUIDATION

HOW WILL LIQUIDATION AFFECT MY COMPANY?

The appointment of a liquidator will have significant consequences on your company and employees. These may include the following:

  • Company directors and employees will not be able to make any decisions on behalf of the company — only the appointed liquidator can make decisions
  • In most situations, the company will cease normal trading activities immediately
  • Liquidators will often freeze the company’s bank account, terminate employment contracts and identify and secure the company’s assets.

To learn more, please do not hesitate to call Australian Company Liquidations on 1800 731 155.

IF I LIQUIDATE MY COMPANY WILL I GET BANNED AS A DIRECTOR?

Generally speaking, if you have not been involved in two or more company collapses within the last 7 years then it is unlikely that the Australian Securities Investment Commission (ASIC) will impose a director banning order against you.

However, in more serious cases, ASIC has imposed a director banning order after the director’s involvement in the first company collapse. This occurred in the case of HIH Insurance which collapsed in the early 2000s. ASIC imposed a director banning order through the court and it was found that the directors had breached their duties as directors in that they had:

  • Failed to exercise due care and diligence;
  • Failed to exercise good faith;
  • Improperly used their position as a director (i.e. abused their powers); and
  • Improperly used information they had obtained as a director.

Want to establish whether you may be at risk of receiving a director banning order?

Call the licensed insolvency advisers from Australian Company Liquidations today on 1800 731 155.

CAN I BECOME PERSONALLY LIABLE FOR COMPANY DEBT?

As a company director, you can only become personally liable for company debts under the following circumstances:

  1. You have provided a personal guarantee to an individual creditor (or trade supplier); or
  2. The Court declares that you continue to incur debts whilst the company was insolvent; or
  3. You did not complete and lodge your Business Activity Statements with the ATO within 3 months of their due dates.

To establish whether you are personally liable for your company debts, call the liquidation experts today on 1800 731 155.

WILL THE COMPANY LIQUIDATION AFFECT MY PERSONAL CREDIT RATING?

If your company has been placed into liquidation, this event will be recorded on ASIC’s database. Anyone who pays for a personal name search will be able to see this record. However, once the liquidation has been completed, the listing will be removed.

If you need to refinance your personal assets or are seeking additional personal finance and your new financier is concerned about the liquidation, you can ask the liquidator to issue a letter stating whether or not they have any objections to you obtaining additional personal finance.

If you would like to learn more about how a company liquidation may affect your personal credit rating, call us on 1800 731 155.

WHAT IS THE EFFECT OF THE LIQUIDATION ON UNSECURED CREDITORS?

The appointment of a liquidator will have significant effects on unsecured creditors, including losing the ability to recover any outstanding money from the company. Other ways a liquidation may affect unsecured creditors may include:

  • Preferential payments. If any unsecured creditor has received a payment which the liquidator considers to be “preferential” then the liquidator may attempt to “claw it back”.
  • 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 or continue any existing litigation.

To learn more about the effects of liquidation on unsecured creditors, call our insolvency experts today on 1800 731 155.

DOES LIQUIDATION AFFECT SECURED CREDITORS’ RIGHTS?

Under normal circumstances, a liquidation does not affect the rights of a secured creditor. Instead, a secured creditor usually relies on their security for the repayment of their debt. If after selling the asset there is a shortfall, they will become an unsecured creditor for the shortfall amount and

A secured creditor can choose to surrender their security andprove in the liquidation for their entire claim, but this would be most unusual as they would then rank equally with unsecured creditors.

A secured creditor needs to be very careful when they vote at a meeting of creditors in a liquidation. For the purposes of voting, a secured creditor should only claim and vote for the anticipated shortfall in their security (if any). In their proof of debt they must disclose:

  • the particulars of their security;
  • the date when it was given; and
  • estimate the value of the security and any anticipated shortfall.

If the secured creditor fails to follow these strict rules as set out in Regulation 5.6.24 of the Corporations Act, then it must be taken that the secured creditors has surrendered their security (unless a court rules otherwise).

If you would like to understand the effect of liquidation on secured creditors we would always recommend that you obtain independent legal advice.

CAN A COMPANY TRADE WHILST IN LIQUIDATION?

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A liquidator may decide to trade-on a company if they believe that the company may be sold as a going concern and a sale would provide creditors with a better return.

To justify the decision to trade-on, the liquidator should do an assessment to confirm that the value of the business as a going concern would exceed the value of the assets if they were sold individually.

In doing this assessment, the liquidator should also assess the likelihood of incurring any trading losses whilst the business is sold or whether any other significant costs will be incurred in preparing the business for sale. If it is likely that trading losses will be incurred, then the liquidator should notionally deduct these from the expected sale price of the business and compare the net expected result andcompare that to the break-up value of the assets. This analysis is critical because any trading losses incurred in the process could erode the benefit of a sale. The liquidator has a duty of care to the company and to the creditors, so in order to discharge that duty a liquidator must act in the creditor’s best interests.

If the liquidator needs to trade the business for longer than 3 months (in order to sell it as a going concern) then court approval would be required.

If you would like to discuss to circumstances in which a liquidator can trade-on a business whilst the company is in liquidation, call us on 1800 731 155.

We operate a 24 hour / 7 days a week company liquidation hotline so please call when it is convenient to you.

WILL THE EMPLOYEES GET PAID IF I LIQUIDATE MY COMPANY?

The Commonwealth Government set up a scheme known as the Fair Entitlements Guarantee (FEG) to pay employee entitlements in the event of a company collapse. The FEG scheme will pay for the following entitlements if the employee’s termination resulted from the company collapse:

  • Unpaid and underpaid wages (up to thirteen weeks);
  • Unpaid annual leave;
  • Unpaid long service leave;
  • Unpaid pay in lieu of notice (up to five weeks);
  • Unpaid capped redundancy pay (up to four weeks per year of service).

Employees should be aware that the scheme will not pay out entitlements if they resign following the appointment of a liquidator.
If you would like to discuss how the FEG scheme may be applied for your company liquidation, please call FEG hotline directly on 1300 135 040.

CALL OUR FRIENDLY TEAM TODAY ON 1800 731 155
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