Placing a Company into Liquidation Video

Hi and welcome to the Insolvency Experts — I’m Steven Kugel

Today I will briefly discuss placing a company into liquidation.

Firstly, ASIC is able to place a company into liquidation but the 2 most usual circumstances are

1. A creditor owed a debt will petition to wind up the company through the court — and an Official Liquidator will be appointed or – the most active creditors in this way are the Australian Taxation Office and Workers Compensation Insurers — so never ignore these two.
2. The second way companies are placed into liquidation is that the directors recognize there is an issue and they call a meeting of the members of the company to place it into voluntarily liquidation

Why would the directors of a company seek to place it into liquidation?

Well, there are many reasons including;

• The company is insolvent and the directors are trying to protect themselves from insolvent trading claims
• The director may have been served a Directors’ Penalty Notice and he needs to liquidate the company before the expiration of the 21 days to ensure he does not become personally liable for the company’s tax debt
• The directors cannot cope with the overwhelming stress of continuing to trade

Another reason why a director may choose to wind up a company rather than allowing a company to simply be struck off ASIC’s corporate register is that strike off provides no certainty that creditors and in particular the ATO will not issue a Director Penalty Notice. If that were to occur, a director would need to re-register the company in order to place it into liquidation to defeat the Penalty Notice however the process of re-registrations takes longer than the 21 days allowed under the Director Penalty Notice.

Whatever the reason and in whatever way a company is placed into liquidation, the role of the liquidator is the same — to take control of the company and its assets, to investigate and report on the reasons for failure to the ASIC and then to distribute any assets to the creditors in the order laid out under the Corporations Act.