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Sometimes the right decision to make with an insolvent business is to wind it up with company liquidation.
What is company liquidation?
If your company’s found to be insolvent – meaning it can’t pay off its debts – the directors and shareholders may decide to start company liquidation.
Company liquidation is the process of:
- Selling all assets the business owns
- Paying off creditors
- Dissolving the business.
The company will go into Creditors Voluntary Liquidation (CVL) – commonly referred to as business liquidation or company liquidation.
When a business goes into company liquidation in Australia, it’s usually the result of long-term financial difficulties. The quick and effective strategy of liquidation helps its directors comply with their statutory duties.
But there are often steps you can take to recover your business before you have to consider 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.
If your business is currently struggling and you can’t pay your business debts, our specialists can consult you on choosing the option most appropriate for your business situation.
Winding Up Your Company: How it could impact you
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
- Distributing any surplus 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.
If you find yourself in a company that’s about to be liquidated or has been liquidated, it can place a huge amount of stress and frustration on you. We’ve worked closely with many Australians in this 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’ve helped others, we hope we can also provide you with the assistance you need.
How to Wind Up an Insolvent Company
You can determine the financial viability of your company by entering a period of voluntary administration and appointing a voluntary administrator.
Speak to Revive Financial about appointing a liquidator. Revive will be able to advise you on your company’s situation and the potential costs involved.
When it gets to this point, your company has officially been wound up.
What Company Liquidation Involves
When a company goes into liquidation, its shareholders or creditors will appoint a liquidator. They will:
- 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 (reporting them to ASIC)
- Distribute the proceeds of asset realisation to creditors
- Apply to deregister the company when the liquidation is complete.
As a result of company liquidation, the company’s debts are written off or wiped, and the company is deregistered.
After Liquidation: What Comes Next?
When a business goes through liquidation, it can be an upsetting and frightening process. You’ll see a company you value quickly dissolve, you won’t get to see your co-workers anymore, and you’ll have lost your source of income.
In addition to the effect of winding up your company, you might also face some personal insolvency matters as a result. For example, if you have personal guarantees in place for leasing or certain services, you’ll be held liable for payment once the company has been wound up. Depending on the amount you owe and the situation, you may have to consider personal bankruptcy as well.
It’ll also be noted on your credit file that a company you were once a director of 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.
For more information on company liquidation in Australia, get in touch with us for a free and confidential consultation
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 in Australia 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’s 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 you want to know more about how your business could be affected by company liquidation, discover our archive of liquidation articles.