5 Top Reasons to Liquidate and Not Voluntarily Deregister a Company

December 13, 2016

5 Top Reasons to Liquidate and Not Voluntarily Deregister a Company | AIA

A company director who sought to voluntarily deregister his company was convicted and automatically disqualified from managing corporations for 5 years.

Under Section 601AA of the Corporations Act, a person may apply to deregister a company only if:

  1. all members agree
  2. it is not carrying on a business
  3. its assets are worth less than $1,000
  4. it has paid all fees and penalties under the Act
  5. there are no outstanding liabilities
  6. it is not a party to any legal proceedings

In this case, the director applied to deregister the company knowing it was a party to legal proceedings in the NSW Civil and Administrative Tribunal.

By signing and lodging the ASIC application, the director knowingly made a false or misleading statement.

Apart from the conviction and automatic disqualification for 5 years, the director was also placed on 12-month good behaviour and fined.

This situation is not unusual.

Companies are often involved in legal proceedings that the directors feel they cannot afford or win.

In these circumstances, placing the company into liquidation is more appropriate as one of the effects of such an appointment is that all legal proceedings are immediately stayed and cannot be continued except with leave of the Court (s471B of the Corporations Act).

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