Starting a Company Liquidation Process in Australia: A Step-by-Step Guide

Embarking on the journey of liquidating a company is a significant decision governed by intricate procedures and legal requirements. In Australia, the liquidation process is framed by clear regulations to ensure fairness and transparency. Here’s a systematic guide on how to Start a Company Liquidation process.

Determine Company Solvency

Before considering Starting a Company Liquidation, evaluate the company’s solvency. If a company cannot pay its debts when they are due, it may be deemed insolvent. This assessment often requires consultation with financial professionals. You should also be aware that it is illegal to trade while insolvent in Australia.

Choose the Type of Liquidation

There are three primary types of Liquidation in Australia:

• Members’ Voluntary Liquidation (MVL): For solvent companies where members decide to wind up the company business.
• Creditors’ Voluntary Liquidation (CVL): Initiated by company members for insolvent companies. This process usually involves [Administration] beforehand.
• Court Liquidation: This is triggered by a court order, typically after a creditor’s application to recover outstanding debt.

Seek Legal or Financial Advice

Before proceeding with Liquidation, company directors should consult an independent financial advisor, accountant, or insolvency professional. At Liquidation Advisory Centre, we can provide insights into company liquidation’s implications, benefits, and obligations.

Convene a Directors’ Meeting

If pursuing voluntary Liquidation, directors should hold a meeting to:

• Confirm the company’s insolvency status (for CVL).
• Pass a resolution to wind up the company and appoint a liquidator.

Conduct a Shareholders’ Meeting

Following the directors’ resolution from the directors’ meeting, a shareholder meeting needs to be conducted to achieve the following:

• For MVL, shareholders must pass a special resolution (requiring a 75% majority) to wind up the company.
• For CVL, a general shareholders meeting is convened, where an ordinary resolution (50% majority) is sufficient.

Appoint a Liquidator

Once the company directors and shareholders decide, a registered liquidator is appointed to oversee the process. The company usually selects the liquidator in voluntary liquidations, while the court appoints a liquidator in court liquidations.

Notification to the Australian Securities & Investments Commission (ASIC)
Once the company liquidation process has started, the relevant forms (Form 205 for voluntary Liquidation or a copy of the court order for court liquidation) must be submitted to ASIC.

Liquidator’s Role Commences

The appointed liquidator takes control of the company’s assets and undertakes various tasks, including:

• Selling company assets.
  Investigating financial affairs.
• Distributing proceeds to creditors.
• Reporting to ASIC on the process and any misconduct.

Inform Creditors

The liquidator must notify all known company creditors about the Liquidation and invite them to submit their claims. The liquidator will assess how the funds from the sale of assets will be divided via an established hierarchy.

Finalizing Liquidation

Once all the company assets are sold, the obligations to staff and stakeholders have been met, the debts to creditors are paid off (as per the established hierarchy), and all investigations are concluded, the liquidator will call a final creditors’ meeting. Here, they will present an account of the Liquidation and prepare a final report.

Deregister the Company

Following the Liquidation’s completion, the company is deregistered with ASIC, marking its formal dissolution.

Need more information to Start a Company Liquidation?

“Initiating a company liquidation process in Australia is a structured affair designed to ensure that all stakeholders are treated justly. Given the legal intricacies and significant ramifications, it’s imperative to approach this process informed and prepared.

Liquidation Advisory Centre are AFSA and ASIC registered advisers, proudly serving Australian companies with over 30 years of expertise in Liquidation advice. Our mission is to empower businesses with clarity and direction during challenging financial times.

Our seasoned team of Liquidation practitioners are dedicated to guiding you through the meaning and implications of Liquidation for your enterprise, highlighting proactive alternatives before considering formal Liquidation, elucidating the legal landscape, and presenting a suite of solutions tailored for businesses aiming to navigate and overcome corporate financial hurdles.”