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:
- 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;
- To identify if the company entered into any uncommercial transactions Will any Payments Made Before Liquidation be “clawed back” by the Liquidator;
- To identify if the company entered into any unreasonable director related transactions Will any Payments Made Before Liquidation be “clawed back” by the Liquidator;
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.