Winding Up your Company in Australia
If your company is found to be insolvent, meaning it cannot pay off its debts, the directors and shareholders may decide to wind it up. Winding up a company is the process of selling all of the assets of a business, paying off creditors and dissolving the business.
The company will go into Creditors Voluntary Liquidation (CVL), commonly referred to as Business Liquidation or Company Liquidation.
Company Liquidation may also happen as the result of a voluntary administration, where the company is wound up and no longer has to pay its debts.
When a company goes into Company Liquidation in Australia, it is usually the result of business failure. It is a quick and effective strategy that helps its directors comply with their statutory duties.
There are often steps you can take to recover your business before you have to consider Company Liquidation. If your business is struggling and you aren’t able to pay your business debts, call Revive Financial and speak to one of our Business Debt Specialists.
Winding Up Your Company: How it could impact you
A liquidation of a company is the systematic closing of a company that deals with its stakeholders. It involves assessing the company’s assets, selling the business operations, distributing the remaining money to the creditors and distributing any surplus of remaining funds to the shareholders.
A company can be voluntarily liquidated due to a members’ or creditors’ voluntary liquidation. Liquidations can also occur as a result of a court order. A court liquidation occurs when the company is forced to liquidate, usually as a result of a creditor following court proceedings.
If you find yourself in a company that is about to be liquidated or has been liquidated, we recognise it can place a high amount of stress and frustration on you. We have worked with many Australians in that situation. While we couldn’t resolve all of their problems, we did manage to stabilise their financial position so they could continue building a strong future for themselves.
As we helped them, we hope we can provide you with assistance as well.
How to Wind Up An Insolvent Company
What Company Liquidation Involves
When a company goes into liquidation, your shareholders/creditors will appoint a Liquidator to:
- secure and sell the company’s assets
- investigate the company’s affairs and report them to creditors
- look into the company’s failure and possible offences by people involved with the company, and report them to ASIC
distribute the proceeds of asset realisation to creditors
- apply to deregister the company when the liquidation is completed
As a result of Company Liquidation, the company’s debts are written off or wiped and the company is deregistered.
In some instances, a Company Liquidation can also be used to avoid personal liability under a Director Penalty Notice issued by the Australian Taxation Office.
After Liquidation: What Comes Next?
Company Liquidation can be an upsetting and frightening process. You will see a company you value quickly dissolve, you won’t get to see your co-workers anymore, and you will have lost your source of income.
In addition to winding up your company, you might also face some personal insolvency matters as a result.
For instance, if you have Personal Guarantees in place for leasing or services, you will be held liable for payment once the company has been wound up. Depending on the amount you owe, you may have to consider personal Bankruptcy as well.
It will also be noted on your credit file that a company you were once a Director for was put into Liquidation.
This might have an impact on your ability to borrow money in the future, particularly if you were hoping to borrow money to start up a new business.
The Directors must answer a Director’s Questionnaire and submit a report detailing the Company’s affairs. They must also hand over all company books and records and comply with any requests made by the Liquidator.
Refusing to cooperate with the Company Liquidator carries a number of offence provisions.
Yes. Like with personal Bankruptcy, the Liquidator must look at all sales or transfers of property in the years leading up to the liquidation. If these transactions appear to have been undertaken to defraud creditors, the property or its value may be recovered.
Liquidators may also look at financial transactions and recover any fraudulent payments made to creditors in the last 6 months.
The liquidator will try to complete the process as quickly as possible. However, there is no way of telling how long each liquidation will take. It depends on the financial position of the company, the assets and the complexity of the business structure.
If your company is being liquidated, it can be a frightening process. You will see…