Complying with legal requirements during liquidation in Australia

Liquidating a company in Australia involves a series of legal requirements to ensure that the process is conducted transparently, fairly, and in accordance with the law. Liquidation legal compliance: whether it is a court-ordered liquidation or a voluntary liquidation started by the company’s directors, liquidation legal compliance and adherence to legal obligations are crucial.

At the Liquidation Advisory Centre, we have over 30 years of experience dealing with company liquidation and insolvency.  Our expert team can help you navigate the complexity of the processes required for company liquidation, ensuring you comply with all the regulations.  Here is our comprehensive guide on complying with legal requirements during liquidation in Australia:

Appointment of a Registered Liquidator

Usually, a registered liquidator must be appointed to oversee the company liquidation process. The appointed liquidator must be a registered and licenced professional in accordance with Australian laws.

Director’s Declaration of Solvency (for Solvent Companies)

In a Members Voluntary Liquidation for solvent companies, directors must make a formal declaration of solvency. This declaration states that the company can pay its debts in full within twelve months of commencing the liquidation process.

Notification to ASIC (Australian Securities and Investments Commission)

Giving notification to ASIC about the company’s intention to liquidate is done by the appointed liquidator, and ASIC must be informed within seven days of appointing a business liquidator. The liquidator will submit these forms, but the Company Directors must provide the relevant information to the appointed business liquidator.

Informing Creditors and Shareholders

The nominated liquidator will inform creditors and shareholders about the decision to liquidate the company. This is usually done at a general meeting of shareholders where the shareholders pass a resolution for winding up the company and appointing a liquidator.  Once this is done, the process of notifying creditors about the meeting and the appointment of a liquidator can begin.

Asset Realisation and Debts Settlement

Once the liquidator has been appointed, they will take control of the company’s assets and work to realise their value. This usually involves selling the company assets, settling outstanding liabilities, and managing the proceeds for distribution to creditors or shareholders.

Employee Considerations

If your company has employees, the liquidator will review the employees’ positions and advise them of their rights in the liquidation. Employee claims are treated as priority creditors (i.e. they get paid ahead of unsecured creditors). Employees may claim unpaid entitlements from the Fair Work Entitlements Guarantee (FEG) for unpaid wages, annual leave, and redundancy payments. Superannuation is paid from the company assets or possibly as a personal obligation of the Directors. 

Taxation Obligations

The liquidator will ensure that all taxation obligations, including reporting and payment of taxes, are fulfilled throughout the liquidation process. Unpaid tax obligations become an ordinary unsecured liability of the company; however, in certain circumstances, the Directors could be made personally liable. The team at the Liquidation Advisory Centre can help you navigate tax complexities.

Reporting and Documentation

The liquidator must maintain accurate records and documentation related to the liquidation process. The liquidator will prepare reports and documents as required by law and then submit these documents to relevant authorities, including ASIC and the Australian Taxation Office (ATO).

Distribution of Assets

The liquidator will ensure that the distribution of assets among creditors in accordance with the legislated priorities is carried out transparently and fairly.

Finalisation and Dissolution

The liquidator is responsible for finalising the company’s affairs. This includes submitting final reports and documents, closing bank accounts, and formally dissolving the company once all tasks are complete.

Professional Guidance

Prior to the liquidation process, it’s highly advisable to seek professional guidance from experts experienced in insolvency, taxation, and matters pertaining to company liquidation.  The professional advisors at the Liquidation Advisory Centre can help you navigate the complexities of company liquidation and ensure full compliance with legal requirements.

Liquidation Legal Compliance

Compliance with legal requirements during the liquidation process in Australia is critical to maintaining transparency, protecting the interests of creditors, shareholders, and employees, and avoiding potential legal issues and costly fees. Whether you’re involved in a voluntary or court-ordered liquidation, adherence to legal obligations is essential for a smooth and compliant liquidation process. Why not contact us for a free consultation to discuss liquidation legal compliance?