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?

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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.

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