Corporate Insolvency and Company Liquidation

What is company liquidation?

Company liquidation is the process of winding up a company’s financial affairs to dismantle the company’s structure by conducting appropriate investigations and enabling a fair distribution of company’s assets to its creditors. Liquidation occurs either because the company cannot pay all of its debts (i.e. it is insolvent), or its members want to end the company’s existence and have it struck off from the Australian Securities and Investments Commission’s (ASIC) register.

At Velos & Velos Lawyers, we can guide you through company liquidation in Melbourne and throughout Victoria.

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Why choose liquidation?

Liquidation is the only way to fully wind up the affairs of a company and end the existence of the company. An independent party undertakes the process and protects the interests of creditors, directors and members while the company structure is dismantled.

How can an insolvent company be wound up?

An insolvent company can either be wound up by the court, usually by one or more creditors making an application to the courts, or voluntarily by resolution of the company directors and, if appropriate, the company members at a relevant meeting.

What is a Court Liquidation?

The applicant must demonstrate to the court that the company is insolvent or can be deemed to be insolvent. The court will then appoint a liquidator, usually one nominated by the applicant (creditor). The court may also wind up a company when there are irreconcilable disputes between shareholders or directors, or for a limited number of other reasons.

What is a voluntary liquidation?

A voluntary liquidation is a process whereby the company voluntarily appoints a liquidator. Creditors have the right to change the appointed liquidator at any time. A voluntary liquidation can occur by a creditors’ voluntary winding up or through voluntary administration.

What is a members’ voluntary winding up?

A members’ voluntary winding up is the process for members who wish to dismantle the company structure. Usually the company will be solvent, and a members’ voluntary winding up is chosen as the company has no useful future.

What is a creditors’ voluntary winding up?

A creditors’ voluntary winding up is a process where the directors determine that the company is insolvent and resolve to place the company into liquidation and they appoint a liquidator. A meeting of creditors is held within 18 days (with an 11-day convening period and a 7-day notice period) of the resolution to wind up the company. At this meeting, the creditors have the opportunity to change the liquidator.

A creditors’ voluntary winding up is commonly used when a company is insolvent and a Deed of Company Arrangement (DOCA) is not possible and the company simply needs to be liquidated. If a wind-up application has been filed with the court, or if the court has ordered that company be wound up, a creditors’ voluntary winding up is not possible.

Voluntary administration

A company can also be wound up voluntarily through the voluntary administration process. The directors resolve to appoint voluntary administrators to the company.

A resolution of the members is not required. After the resolution is passed the administrators who consented are then appointed. A meeting of creditors is held within eight days of the appointment of the voluntary administrator. At this meeting, creditors have the opportunity to appoint alternative administrators.

After the first meeting, the voluntary administrators conduct investigations into the company and issue a detailed report pursuant to section 439A of the Corporations Act 2001. This report outlines the investigation’s findings and the available options for creditors regarding the company’s future.

The options available to creditors are:

to accept a DOCA, if one is proposed
to place the company into liquidation
to end administration and hand the company back to the directors.

A second meeting of creditors is held to consider these options. Voluntary administrations are geared towards a company that wishes to put up a DOCA; however, there are circumstances where it may be appropriate to place a company into liquidation, for example:

winding-up proceedings are underway and therefore the creditors’ voluntary winding-up process is not an option
the business is continuing to trade whereby it is more appropriate or advantageous for a voluntary administrator to manage ongoing trade
a DOCA is being considered.

Typically, the voluntary administration process is more expensive due to the increased work involved. In most cases the creditors’ voluntary winding up process is a more appropriate method of the voluntary appointment of a liquidator. The liquidation process is almost identical, regardless of how it is started.

Obtain expert advice from Velos & Velos Lawyers on liquidations and administrations

With over forty years of experience and expertise in Liquidation and Administration matters, Velos & Velos Insolvency Lawyers Melbourne are ready and able to give you sound, effective and affordable legal advice in these matters to avoid the serious pitfalls in these complex and demanding areas of law. For company liquidation in Melbourne, contact us for expert guidance.

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Velos & Velos Corporate Lawyers Melbourne are ready and able to provide legal advice, appear and brief experienced Expert Counsel on an urgent basis to attend in order to best represent your rights and interests and to seek your full legal entitlements in your unique circumstances, including corporate insolvency and company liquidation in Melbourne.

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Company Liquidation and Corporate Insolvency in Melbourne