Company Liquidation – What to Expect

Insolvency Choice offers a competitively priced ‘No Asset Liquidation Package’. It’s suitable for companies that are either no longer trading or do not have any assets coupled with just a handful of outstanding creditors.

There can be times when it is more appropriate or cost effective to place a company in liquidation than to attempt to continue trading.

The sorts of circumstances where this can apply include:

  •   Concerns about the possibility of trading while insolvent
  • The Court has initiated action against the company
  • There is a significant tax debt, Superannuation Guarantee liability or PAYG debt facing the company
  • The Directors have received a Directors Penalty Notice.

Why Liquidation?

The idea behind liquidating an insolvent company is to allow a independent third party to take control of the company and wind it up in accordance with legal and ASIC requirements.

Two types of liquidation

Two main types of liquidation can apply in these circumstances – a creditors’ voluntary liquidation, and a court liquidation.

In a creditors’ voluntary liquidation, creditors typically vote for the company to be placed in liquidation or the shareholders may agree to appoint a liquidator to liquidate the company.

By contrast, a court liquidation involves a liquidator formally being appointed by the court to wind up the affairs of a company often in response to an application by a creditor.

The advantage

One of the key benefits of a company liquidation is that once a liquidator has been appointed, unsecured creditors cannot begin or pursue legal action unless the court rules otherwise.

The chain of events

Once a liquidator is appointed, he or she will:

  • Gather together and sell or ‘realise’ the company’s assets
  • Report back to creditors about where the company stands and any possible claims against the company officers. These will also be reported to ASIC.
  • Distribute any proceeds remaining after the liquidator’s costs in line with the rights of secured creditors.
  • Once the liquidation is complete, make an application to deregister the company.

If any funds remain after payment of the liquidator, creditors and employees, any unsecured creditors may receive payment on a pro-rata basis.

Insolvency requires specialist advice. Talk to Insolvency Choice today.