What is Company Liquidation?
Company Liquidation involved the sale of company assets through a company’s winding up process. The purpose of liquidating an insolvent company is to have an independent and suitably qualified person (the liquidator) take control of the company so that its affairs can be wound up in an orderly and fair way for the benefit of all creditors. Liquidation packages from SM Solvency Accountants start at just $1,800.
When and why should I liquidate?
Ideally, you should commence Company Liquidation as soon as it comes to your attention that your company is insolvent. If you don’t then you are risking a breach of Insolvent Trading laws, which is a criminal offence.
Alternatively your company members may agree to commence Company Liquidation voluntarily even though the company is solvent.
Company Liquidation offers the following benefits to company Directors:
- Upon commencement of a Company Liquidation, the company’s creditors will cease pursuing payment from the Director and instead deal exclusively with the appointed liquidator. This takes the stress of constant harassment and threats of legal action off your shoulders and allows you to move on with your life.
- A Director Penalty Notice (DPN) issued against the company Director will be rescinded if the company is placed into Company Liquidation within 21 days of the date of issue (provided it is not a “knock-down” DPN: speak with one of our consultants for more information or visit our page explaining DPNs by clicking here).
- Any potential for criminal prosecution due to breaches of Insolvent Trading laws will be averted.
- Once the Company Liquidation is complete, the Director will be free to move on to more prosperous future business ventures.
What causes a company to liquidate?
SM Solvency Accountants has identified our clients’ top 10 reasons for seeking our low cost Company Liquidation services:
- Unmanageable company and business tax debts
- Cash flow problems
- High rents
- PAYG overdue
- Inability to uphold taxation payment plans
- Debtors not paying on time – causing cash flow problems
- Inability to meet payment plans
- Inability to uphold Director’s guarantees
- Inability to uphold personal guarantees to suppliers
- Receipt of a Directors Penalty Notice
If you have these issues then it is best to call us immediately and ask about our low cost Company Liquidation. Let us take the stress for you: we will give you solutions to your debt problems to help you start over immediately.
What are the different types of Company Liquidation?
1. Official Liquidation – The application for Company Liquidation is made to the court by creditors of the company. In order for official liquidation to commence, the creditor/s must verify to the court that the company is insolvent (unable to pay its debts as and when they fall due). The Company Liquidation is initiated and an official Liquidator is appointed. The Liquidator will conduct thorough research into the financial affairs of the company in order to distribute these assets and ascertain whether or not illegal/improper activities have taken place.
2. Provisional Liquidation – If the court considers that the assets or financial resources of the company may be at risk during the interim time that lapses between filing of the application and and the time of the court hearing, a provisional Liquidator may be appointed to administer and exercise control of the company in order to protect the best interests of the creditors and higher-end distributions. Provisional liquidation will often be executed to ensure that creditors are compensated as close to full satisfaction of arrears as possible when the official liquidation commences.
3. Creditors Voluntary Liquidation (CVL) – A CVL occurs when a business is no longer able to pay its debts as and when they fall due, and the shareholders come to an agreement under a special resolution that the company is to be wound up. The company must be insolvent in order to perform a CVL. Once a company becomes insolvent it may be the only option to satisfy the debts in a feasible manner and without waiting for the Company Liquidation to be appointed by the court, which would result in an official liquidation.
4. Members Voluntary Liquidation (MVL) – An MVL occurs when the company is solvent, and the directors/shareholders simply agree to cease trading of the company, wind up its affairs and liquidate the structure and assets to completely dismantle the company.
How do I commence Company Liquidation?
Call SM Solvency Accountants on 1300 781 348 today or contact us online by clicking here.
What does the liquidator do?
Throughout a Company Liquidation, the liquidator has a duty to all of the company’s creditors. The liquidator’s role is to:
- Collect, protect and realise the company’s assets;
- Investigate and report to creditors about the company’s affairs, including any unfair preferences that may be recoverable, any uncommercial transactions that may be set aside and any possible claims against the company’s officers;
- Enquire into the failure of the company as well as any possible offences by people involved with the company and then report to ASIC accordingly;
- Distribute the proceeds of realisation after payment of the costs of the liquidation and subject to the rights of any secured creditor (first to priority creditors, including employees, and then to unsecured creditors);
- Apply for deregistration of the company upon completion of the liquidation.
Except for lodging documents and reports required under the Corporations Act 2001 (Corporations Act), a liquidator is not required to do any work during a Company Liquidation unless there are enough assets to pay their costs.
If the company is without sufficient assets, one or more creditors may agree to reimburse a liquidator’s costs and expenses of taking action to recover further assets for the benefit of creditors.
If any additional assets are recovered then the liquidator or particular creditor can apply to the court for the creditor to be compensated for the risk involved in funding the liquidator’s recovery action throughout the Company Liquidation.
Who gets paid first and when?
Generally, the order in which funds are distributed is:
- Costs and expenses of the Company Liquidation, including liquidators’ fees.
- Outstanding employee wages and superannuation.
- Outstanding employee leave of absence (including annual leave, sick leave—where applicable—and long service leave).
- Employee retrenchment pay.
- Unsecured creditors.
Each category 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 be paid nothing).
How much will liquidating my company cost me?
View SM Solvency Accountants Company Liquidation packages by clicking here.
Generally in straight-forward cases (companies with sufficient assets and between 1-3 creditors) low cost Company Liquidation from SM Solvency Accountants can start from as little as just $1,800.
What happens after a Company Liquidation?
Liquidations effectively end when the liquidator has realised and distributed all the company’s available property and made their report to ASIC.
In a creditors’ voluntary liquidation, the liquidator must hold a final joint-meeting of the creditors and members to give an account of how the Company Liquidation has been conducted and of how company property has been disposed. After the final meeting is held, the company is automatically deregistered by ASIC three months after a notice of the holding of the meeting is lodged.
In a court liquidation, the liquidator is not required to hold a final meeting of creditors. After the liquidator decides that the company’s affairs are fully wound up, they may:
- Seek an order for release from the court,
- Seek an order for release and that ASIC deregister the company, or
- If there are insufficient assets to obtain a court order for the company’s deregistration, request that ASIC deregister the company.
A company ceases to exist after it has been deregistered.
Call SM Solvency Accountants today on 1300 434 165 for Company Liquidation at Australia’s best prices