What Happens When a Company Goes into Liquidation in Australia

If a creditor is a corporation, he may designate in writing a person to represent him on the board of directors. All payments made by the company to a creditor in the six months preceding liquidation do not constitute unfair preferences. The Corporations Act offers various objections to an unfair preference request. Creditors have the right to request information from the liquidator at any time. A liquidator must provide the creditor with the requested information if the liquidator`s request is “reasonable”, if the information is relevant to the liquidation and if the provision of the information would not result in the liquidator failing to perform its obligations. A liquidator must provide this information to a creditor within 5 working days of receipt of the application, unless a longer period is agreed. If, due to the nature of the information requested, the liquidator needs more time to comply with the request, he may extend the time limit by notifying the creditor in writing. When creditors take the decision to appoint an auditor liquidator, the costs of the auditor liquidator are part of the liquidation costs. If one or more creditors appoint the revising liquidator with the consent of the liquidator without adopting a resolution, the costs of the revising liquidator will be borne by the creditor(s) appointing the liquidator auditor. In the event of compulsory liquidation, the liquidator is not obliged to convene a meeting of creditors, unless the creditors have to agree on a matter. A “special representative” is used when you indicate on the proxy form how the proxy officer should vote on certain resolutions (the actual text of the resolution can be found on the form).

The mandatary must vote in accordance with this instruction and may not change the vote at the meeting. In addition, the solution specified in the form is the one you are voting on. If another decision is proposed (or if the decision is changed), your special representative should not be counted because you have not indicated how you will vote on that modified or different decision. A “general agent” is used when you leave it to the proxy to decide how to vote on each resolution. A liquidator also has the right to request permission to pay his estimated future fees (for work that remains to be done). As a rule, this is necessary so that the liquidator can continue to work until a certain time (for example. B to achieve a certain result) or until the liquidation is completed. ASIC may also exclude business owners from business management for up to five years if a person is or has been a manager of two or more companies that have relied on the Fair Rights Guarantee System (FEG) to pay employee claims within seven years. Its main task is to the shareholders of the company. You are also required to comply with the general and specific laws that apply to the operation of your business.

However, if your business is insolvent or there is a real risk of insolvency, your obligations extend to creditors (including employees with unpaid claims). The role of the directors during the liquidation process is to cooperate fully with the liquidator. You should meet with the liquidator to assist him if necessary, hand over all information about the company, including all books and records, inform the liquidator of all of the company`s assets and its location, and attend a creditors` meeting with the liquidator upon request to provide information about the company to creditors. Yes, in certain circumstances, a liquidator has the power to recover property sold or sold prior to liquidation. This is a complicated area, but in short, a liquidator can try to recover assets if an asset sale was not commercial or was made to defeat creditors. Liquidation is the exact opposite of voluntary administration. Whether required by creditors, shareholders or the courts, liquidation means that the writing is on the wall and the company will soon cease to exist. The liquidation process involves liquidating the company`s business, selling assets to pay creditors in order of priority, and closing doors forever.

If a liquidator suspects that persons involved in the company may have committed crimes and that the liquidation does not have or does not have enough assets to pay the liquidator for its further investigation work, the liquidator may apply to ASIC for funding to conduct a more thorough investigation and report to ASIC. In short, many of the above could be signs that the business is being considered insolvent, which is defined as “the inability to pay the debt when it falls due.” Bankruptcy is not necessarily binary (various things affect whether a company is considered insolvent or not), but if the company is insolvent and continues to act, it and its directors may run the risk of violating insolvent business laws, which can have personal consequences for directors. The most common type is a voluntary liquidation of creditors, which begins when: The voluntary administrator aims to manage the affairs of the company in order to obtain a better return for creditors than if the company had been directly put into liquidation. Better performance can be achieved through a DOCA, which is usually offered by directors or other third parties, usually in consultation with the volunteer director. Voluntary liquidation of creditors takes place for insolvent companies. It is launched voluntarily by a special decision of the company`s creditors. Liquidation might be the best or only option if your business is insolvent and risks violating insolvent trading procedures. Transferring a business to voluntary administration is quick and easy.

The directors of the Corporation decide that the Corporation is insolvent or is likely to become insolvent and that a director will be appointed. Directors must also obtain the written consent of a registered liquidator to act as a voluntary director before appointing a director. Your business could opt for a temporary liquidation if you need to protect your business assets from the risk of damage or loss. On January 1, 2021, we witnessed the introduction of a streamlined liquidation process designed specifically for small businesses. It is available to people with 20 or fewer employees and liabilities not exceeding $1 million. .