For additional information about the simplified liquidation process, refer to the simplified liquidation FAQs. If a liquidator suspects that people involved with the company may have committed offences, and the liquidation has no or insufficient assets for the liquidator to be paid for their work to further investigate, the liquidator can apply to ASIC for funding to carry out a further investigation into the allegations and report to ASIC.
Except for lodging documents and reports required under the Corporations Act Corporations Act , a liquidator is not required to incur an expense for the winding up unless there are enough assets to pay their costs.
Compensation is usually paid before other creditors are paid. The liquidator must also send an initial remuneration notice if they propose to seek fee approval during the liquidation: see Information Sheet 85 Approving fees: A guide for creditors INFO The liquidator must send a report to creditors within three months after their appointment containing information about:. The report may give additional information relevant to the liquidation or notify creditors about whether the liquidator will convene a meeting of creditors.
The liquidator might also attach details of a proposal for creditors to consider and vote on without the need to hold a meeting. The liquidator must lodge a copy of the report with ASIC. While there is no legal requirement to provide further reports to creditors, liquidators may provide further reports to update creditors about the liquidation. Creditors can ask the liquidator to provide a further report.
If the request is reasonable, the liquidator must comply with the request. See other creditor rights below. In general terms, a payment to a creditor may be an unfair preference payment if, during the six months before the liquidation is taken to have begun until the date the liquidator was appointed:.
Note: Depending on the circumstances surrounding the appointment of the liquidator, the date the liquidation is taken to have begun may be a date before the date on which the liquidator is appointed.
In a simplified liquidation, a payment or series of payments made to an unrelated creditor are not recoverable as an unfair preference unless:.
Not all payments made within the relevant three- or six-month period before the liquidator is appointed are unfair preference payments. In particular, a creditor has a defence to a claim they have received an unfair preference if they can prove that, at the time the payment was made:. If a liquidator seeks to recover a payment that has been made to you, you should ask the liquidator to provide you with:.
ASIC is also entitled to attend and participate in a meeting of creditors should there be a reason to do so. A liquidator cannot call a meeting of creditors when the liquidator has adopted the simplified liquidation process. If a direction to call a meeting by creditors or the committee of inspection is not reasonable, the liquidator does not have to comply. A direction is not reasonable if the liquidator, acting in good faith, thinks that:.
If the direction is not reasonable, the liquidator must notify the person or body that gave the direction and set out reasons why it is not reasonable.
If the liquidator decides not to convene a meeting because it is not reasonable, but the person or body who gave the direction agrees to pay the costs of calling and holding the meeting, and security for those costs is provided if the liquidator requires that, the liquidator must convene the meeting: see section of the Insolvency Practice Rules Corporations If a request to call a meeting by creditors or the committee of inspection is not reasonable, the liquidator does not have to comply.
However, they must notify the person or body that made the request and set out reasons why it is not reasonable. If the liquidator decides not to convene a meeting because it is not reasonable, but the person or body who gave the direction agrees to pay the costs of calling and holding the meeting and security for those costs is provided if the liquidator requires that, the liquidator must convene the meeting: see section of the Insolvency Practice Rules Corporations The minutes must be lodged with ASIC within one month.
The chairperson of the meeting decides whether to accept the debt or claim for voting purposes. The chairperson may decide a creditor does not have a valid claim and not allow the creditor to vote. This decision is only for voting purposes. It is not relevant to whether a creditor will receive payment of their claim. You can appeal to the court within 10 business days after the chairperson decides to accept or reject a proof of debt or claim for voting purposes. You can appoint an individual as proxy to attend and vote at a meeting on your behalf.
Creditors who are companies will have to nominate a person as proxy. You do this by completing a proxy form that is sent out with the notice of meeting.
You must provide the completed proxy form to the liquidator before the meeting. An electronic proxy form may be used if the liquidator allows electronic lodgement. The proxy holder must vote in accordance with that instruction and cannot change the voting at the meeting. Further, the resolution specified in the form is the one you are voting on. If a resolution that is specified in the special proxy is modified, then your special proxy should not be counted because you have not indicated how you will vote on that modified resolution.
Subject to directions given in the special proxy, the proxy has the same right to speak and vote on other matters that may arise at the meeting as the creditor who appointed them. You can appoint the chairperson to represent you through either a special or general proxy. If voting is on the voices, the resolution is passed if a majority of those present indicate agreement.
It is up to the chairperson to decide if a majority is reached. After the vote, the chairperson must tell those present whether the resolution passed or failed. If the chairperson cannot determine the outcome of a resolution on the voices, they may conduct a poll. A person participating and entitled to vote can also demand a poll.
If a poll is demanded, it must be taken immediately, and the chairperson determines how to take this poll. If the meeting is held using virtual meeting technology, each vote must be taken on a poll. If you intend to demand a poll, you must do so before, or as soon as, the chairperson has declared the result of a vote taken on the voices. If a majority in both number and value is not reached under a poll deadlock , the chairperson has a casting vote. When there is a deadlock, the chairperson may use their casting vote except for resolutions to approve their remuneration either in favour of or against the resolution.
The chairperson may also decide not to use their casting vote, and then the deadlocked resolution is not passed. The chairperson must inform the meeting and include in the written minutes of meeting that are lodged with ASIC the reasons why they did or did not use their casting vote.
The court may vary or set aside the resolution or order the resolution is taken to have been passed. Certain criteria must be met before the court will make such an order e. A liquidator who has adopted the simplified liquidation process will use this process to seek resolutions from creditors, including for approval of remuneration. Government agencies communicate via. Trusted website s. Share sensitive information only on official, secure websites.
The information below, unless otherwise stated, is largely applicable to the liquidation of a limited liability partnership. Any surplus is then distributed among the contributories of the company according to their rights and interests, or otherwise dealt with as the constitution of the company directs. Upon the completion of the liquidation, the company goes into dissolution and it ceases to exist. Unsecured creditors are paid on a pari passu basis, i. Any surplus is then distributed among the contributories of the company.
The liquidation commences at the time of passing the resolution. It is adopted where the company is able to pay its debts in full within 12 months after the commencement of winding up.
The directors of the Company are required to file a declaration of solvency. If the company is not able to meet its liabilities, the company can convene a meeting with its creditors to consider its proposal for a voluntary winding up of the company. If a resolution is passed in favour of the winding up, the company will appoint a liquidator, subject to any preference the creditors may have as to the choice of liquidator.
Under section of the Insolvency, Restructuring and Dissolution Act , the company itself, creditors, contributories, liquidator, judicial manager or the Minister may present a winding up application to the High Court.
The winding up is deemed to have commenced as at the date of the presentation of the winding up application. Section of the Insolvency, Restructuring and Dissolution Act states all the grounds under which the Court may liquidate a company. The common grounds for a company to be wound up by the Court include:.
Click here to view the major stages involved in a compulsory liquidation. An application may be made to the Court to stay or restrain pending proceedings against the company at any time after the presentation of a winding up application and before a winding up order has been made. The Court may allow the disposal of property for continuation of business or in the ordinary course of business, which may be beneficial not only to the company but also to the unsecured creditors.
A CVL is the form of liquidation where directors decide to liquidate a company. Shareholders then attend a general meeting to approve this decision. Creditors meetings can now been done virtually via video conferencing.
A physical meeting can be requested under certain circumstances. This process is much slower than a CVL, and the company has no control over the sale of assets. Compulsory liquidation begins when a creditor serves a statutory demand giving you 21 days to pay, or 18 days to set the demand aside.
If you do not pay or refute the demand, the creditor can apply to the court for a winding up hearing. At this hearing, the court will decide whether the petition should transition to a winding up order, resulting in the liquidation of the company. The appointment of a liquidator, which means that the powers of the directors cease, usually takes between one and two weeks. This is the minimum statutory notice for creditors.
It doesn't stop there in that the liquidators now have to sell the assets etc, do investigations and file the necessary paperwork. This can take years, if not longer. The bigger the liquidation, the longer it takes usually. For compulsory liquidation, the time between the initial threat and the end-of-court proceedings is usually three months.
However, in both cases, this is just the time it takes to approve the liquidation.
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