No one wants to find themselves or their business at the point of insolvency, but it’s a reality for many individuals every year. Even a once successful business can find themselves on the brink of insolvency; at that point, business owners have little other choice but to engage in a liquidation.
The first step in starting a liquidation is simply to contact a liquidation company or insolvency professional. These are industry professionals who are registered and licensed with the Australia Securities and Investments Commission who know the ins and outs of insolvency, and can help business owners weigh the pros and cons of liquidation while formulating a long term plan for success following the liquidation.
Why Liquidate At All?
Many individuals are resistant to the concept of liquidation, as it translates to them as a personal failure. In truth, liquidation can be a means to mitigate a company’s dire financial situation and also limit any personal liability of the directors.
What’s more, beginning the liquidation process diverts the attention of creditors or legal proceeding to the liquidator’s office rather than to the director.
Still, liquidation is far from being the only option for a struggling business, which is precisely why contacting an insolvency professional is the first step when liquidation seems imminent. If the liquidation professional determines that there’s simply no other option, it’s time to begin the process of liquidations.
Start By Selecting A Liquidator
Once a company realizes that simply reframing their business plan or shifting focus won’t be enough to save them, they should select a liquidator.
A good liquidator will be willing to talk business owners through the process of liquidation, lingering on any detail or question for as long as necessary. In reality, the most difficult part of starting a liquidation is simply making the decision to pursue one; from there, the steps that follow are quite simple.
Pass A Resolution
The second step in completing a liquidation in Australia is passing a director’s resolution which states that a company is, indeed, insolvent. For many directors, this is a personally emotionally taxing step in the process, as it officially expresses liquidation intentions.
After the director’s resolution has been issued, it’s time to include the shareholders in the process; a meeting must be called where they can complete the final step in the early processes of starting a liquidation.
Appointing A Liquidator
When shareholders convene, they’ll need to pass a resolution of their own. This one concerns appointing a liquidator, and this resolution will have to be passed with a 75% majority.
The ability to appoint their own liquidator is one of the biggest reasons that companies choose voluntary liquidation, and one of the reasons that an insolvency professional might advise them to do so. Alternatively, the court would appoint a liquidator instead.
Once these three items have been checked off of the list, the key players in a company can immediately take a step back—things are now officially out of their hands.
What Happens Next?
After the three above mentioned steps have been completed, the process of liquidation is outside of the business’ hands entirely. The appointed liquidator takes control, and completes a thorough investigation into the company’s financial dealings. The liquidator also deals with all creditors – and the director no longer needs to field endless calls from people demanding payment.
Of course, the director is expected to assist the liquidator as is reasonably needed. So long as a director has kept adequate records of the business’ financial dealings, they’ll have nothing to worry about.
While the liquidator must turn their findings over to the ASIC and report to the company’s creditors, they will also help to facilitate the sale of company assets and the distribution of surplus funds, if any exist.
After the liquidator has completed each of their roles, the process has finished officially, but the reality is that the difficulty with liquidation has been over for quite a while by that point as far as the business owners are concerned. This is because, as mentioned previously, the burdens of the company are completely relinquished once a liquidator is appointed, so directors can get on with forging a new path.
The Role of An Insolvency Team
It goes without saying that a person wondering whether it’s time to liquidate their business won’t be able to make an informed decision if they don’t receive quality advice right from the outset.
An insolvency team ensures that business owners are acting in their best interest by having all the information they require to make an informed decision.
The long and the short of it is that starting a liquidation begins with forging a meaningful connection with a team like the one at The Insolvency Experts. We’re here to offer guidance and assistance every step of the way—simply contact us and receive a helping hand in the voluntary liquidation process.
If you need help, call The Insolvency Experts on 1300 767 525