The purpose of a liquidationis to ensure that a company is wound up fairly and equitably when it is unable to payits debts as they fall due.If, at any time, a company is unable to pay all of its debts (which are due and payable), the director/s of the company should appoint a liquidator.The liquidator is responsible for dissolving the company’s affairs and distributing the available funds in accordance with the Corporations Act (“the Act”).
Sometimes it turns out that there are insufficient funds available to pay the creditors 100% of their debt; sometimes there is no return to creditors available at all. If there is a partial dividend to be distributed it will be done in accordance with the order set out in the Act.The liquidator must prepare and lodge a confidential report with the Australian Securities and Investments Commission (ASIC) if the dividend return to unsecured creditors is less than 50%. This report will outline the liquidator’s findings into any breaches of duty on the part of the company’s directors.
In addition, the liquidator will investigate the following matters and report their findings to both ASIC and the creditors:
- Has the company made any preferential payments to creditors within the six months leading up to the liquidation?
- Did the company enter into any uncommercial transactions?
- Did the company enter into any unreasonable director related transactions?
Each of the duties and activities carried out by the liquidator are designed to ensure that each creditor of the company is treated as fairly as possible as the company is wound up and dissolved.
If you would like to learn more about a company liquidation call us today on 1800 003 883. We are available 24 hours 7 days a week for free and confidential advice.