August 22, 2019
The most commonly asked question by Company directors and business owners considering company liquidation is “what is the cost of the liquidation process?”
Well – that really depends on how the Company is wound up.
An insolvent Company may be wound up in two ways.
Either way, when a Company is insolvent and unable to pay its debts, a registered liquidator is required to act as External Administrator for the purpose of the winding up.
An insolvent company may be voluntarily placed into liquidation by a resolution passed by a 75% majority of the shareholders.
Where shareholders agree to appoint a liquidator, the process is known as a Creditors Voluntary Liquidation.
This method of liquidation;
So, if there are assets remaining within a Company, and those assets are enough to cover the costs of a liquidation, a director does not have to contribute a cent to the winding up process.
However, if there are no assets remaining in a Company, a registered liquidator will need to agree a fair director contribution towards the costs and expenses of performing the liquidation. The agreed amount will depend on a number of factors including the situation of the Company, the number of creditors and the complexity of issues expected to name but a few.
Each case is assessed individually but obviously, the more creditors and issues there are, the more professional time will be spent and a higher contribution required by the director/shareholder.
As a guide only, an insolvent Company liquidation with a limited number of creditors and no obvious complexities may require a fixed director contribution from as little as $5,500 – $9,000.
However, as with any professional service, each matter must be individually assessed and we encourage you to call us anytime on 1300 767 525 for a free quote specific to your circumstances.
An insolvent company may be wound up on the petition of an unpaid creditor to the Court.
This process is paid for by the aggrieved creditor and is likely to cost them anywhere from $7,000 to $9,000 in legal and court filing fees alone.
In this case, the creditor selects the Liquidator and is required to obtain a Consent to Act signed by a registered liquidator. The Court will then appoint that liquidator. This type of liquidation is known as an Official Liquidation.
Creditors of an insolvent company may also elect to appoint a liquidator at the end of the Voluntary Administration process.
However a liquidation is commenced, whether by the members or the creditors, the liquidation process is virtually identical and requires the liquidator undertake a detailed examination of the company and the circumstances and reasons leading to its winding up.
Once these investigations are completed, the liquidator must report all findings to ASIC and the creditors under the Corporations Act.
Here are some signs that your company may be insolvent;
If you are experience any of the above, you should consider taking action or seeking advice as soon as possible. Always seek advice early.
If you are worried and you want to know what your options are, contact The Insolvency Experts.