Starting Liquidation in Wollongong & NSW
Enacting Liquidation in New South Wales
If your New South Wales based company has too much debt, you’re worried about trading insolvent, and you can’t see a future for your business, liquidation is likely your best path forward. While it may seem like a negative solution or admittance of failure, it’s actually a cost-effective way to wind things up quickly and start afresh.
Liquidation is a formal insolvency appointment. It involves handing your company over to a registered liquidator who sells you assets, pays your creditors, and dissolves the business. The liquidation process in Wollongong & New South Wales, typically takes around twelve weeks for simple companies, or up to 18 months for more complex ones.
There are three types of liquidation in NSW: creditors’ voluntary liquidation (CVL), members’ voluntary liquidation (MVL), and court liquidation, which is involuntary and typically issued if a statutory demand hasn’t been paid. CVL is the most common type for insolvent companies; for an MVL to go ahead for a solvent company, directors must agree on a Declaration of Solvency.
The liquidation process in Wollongong
Appointing A Liquidator
Whether you or creditors initiated liquidation, a registered liquidator must be appointed. Our first job is to publish a notice on the public ASIC Published Notices website and notify other stakeholders.
Processing Of Affairs
As liquidators, we attend to the practical matters of the liquidation. This includes selling company assets, investigating potential offences or inappropriate transactions, reporting to ASIC and creditors, and distributing any surplus to creditors or other stakeholders.
Once assets have been realised and funds distributed, we’ll lodge a final return to ASIC. ASIC will then deregister your company within three months.
Susanne owned a small retail business selling clothes and gifts in a local Wollongong shopping centre.
Increasing competition in the area and online had reduced sales and rent had also increased. As a result, she found herself struggling to keep up with costs and ATO payments. She had taken some actions to reduce costs, including letting a part-time staff member go.
Susanne was feeling highly stressed and had been hanging on hoping to save the New South Wales business but realised that it simply wasn’t viable anymore.
Susanne initially wanted to avoid a formal insolvency appointment and initiated a closing down sale to pay off creditors. However, after this was insufficient, she decided to seek our help and appoint us as a New South Wales registered liquidator.
When we took control of the Wollongong business, Susanne felt a huge weight had been lifted, despite the disappointment. We sold the remaining assets, paid the outstanding debts, and finalised the closure for her.
No More Outstanding Debts
The assets sold generated enough money to pay a return to creditors and the process was low cost.
A Feeling Of Control
Because she decided to liquidate, Susanne felt in control and prepared for the outcome.
The Stress Was Over
Susanne was able to put the stress behind her and move forward in her life.
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Frequently Asked Questions
How Long does Company Liquidation Last?
The time it takes to complete a Company Liquidation will vary depending on how complicated the company’s affairs are. There is no set time limit with which the Company Liquidation needs to be completed and as such, it can range from 12 to 18 months (for an average-sized company that is fairly uncomplicated) to longer (if the company’s affairs are complex). The main factors that affect the time-frame of the Liquidation are the structure of the company, its dealings prior to being liquidated and whether it will be necessary to litigate.
What is my Duty as a Director if my Business Enters Company Liquidation?
You have the same duties and obligations during the Company Liquidation period as you had prior to the Liquidator’s appointment. In addition, you must:
- Provide the Liquidator with a report as to the affairs of the company,
- Provide all of the company’s books and records to the Liquidator, and
- Reasonably assist the Liquidator in carrying out his or her role.
- Refusing to cooperate with the Liquidator carries a number of offence provisions.
When a Business goes into Company Liquidation, Who is Paid First?
The priority for payment of proceeds in a Company Liquidation is generally as follows:
- Costs and expenses of the Liquidation, including the Liquidator’s fees,
- Secured creditors,
- Employee claims, and
- Unsecured creditors.
Before any proceeds are paid to a creditor for their debt or claim, they will need to give the Liquidator sufficient information to prove their debt. Payments to creditors in a Liquidation are known as dividends. Each category of creditor is paid in full before the next category is paid. If there are insufficient funds to pay a category in full, the available funds are paid on a pro rata basis and the next category or categories will not be paid. Unfortunately, there is no guarantee creditors will be paid at all. This is the case when there is no money left in your company to satisfy creditor claims.
Will Company Liquidation Affect my Credit Rating?
Credit reporting bureaus do keep track of companies that enter Company Liquidation and the names of the directors of those companies. The ‘mark’ on your credit report is there, but it is unlikely to affect you if you’re applying for personal credit. For example, if you want to apply for a credit card or personal loan, it generally won’t be an issue. However, if you want to apply for a business loan, it is much more likely the ‘mark’ may make future lending more challenging.
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