Company Liquidation

How to liquidate a company in Australia

Placing an insolvent company into liquidation in Australia is a simple and relatively inexpensive process that requires 3 basic steps;

  • Select a liquidator; then
  • pass a directors’ resolution that the company is insolvent and call a meeting of shareholders; then
  • the shareholders should resolve to appoint a liquidator – this resolution must be passed by a 75% majority of members

While the process of placing a company into liquidation is simple, deciding on whether liquidation is appropriate or not is far more complex.

The best way in which directors can decide on whether liquidation is appropriate is to obtain honest and competent advice from a licensed and registered professional.

The Insolvency Experts are licensed and Registered Liquidators and can be called 24 hours a day on 1300 767 525.

What happens when you liquidate a company in Australia?

When a company is placed into liquidation, the powers of the director are immediately suspended and the Liquidator takes full control of the company and any business and/or assets. See the powers of a Liquidator at Section 477 of the Corporations Act.

Apart from taking control of the assets, the liquidator is required to perform a detailed investigation into the failure of the company.

During this process;

  • directors are required to assist the Liquidator’s investigations by providing books and records and assisting with the liquidators reasonable requests for assistance.
  • At the conclusion of the investigation process, the Liquidator must report to the ASIC and to the creditors.

Do not liquidate a company until you understand the potential impact on you

Liquidation is only one of many options that must be considered.

Is liquidation really the best step for your company? Are there alternatives?

The Insolvency Experts will explain the risks and benefits of company liquidation. Find out which strategy is best by calling The Insolvency Experts today.



Company Insolvency

Even when the situation is desperate, liquidation is not your only option. It is only one in a range of options that are available.

An unplanned liquidation may not only be a traumatic experience, it may be the wrong decision for you – no matter the price.

So before you make a decision on a low cost liquidation based on price alone, take a moment to understand the risks of liquidation and to investigate the alternate choices that are available to you.

Call The Insolvency Experts on 1300 767 525

Company Insolvency – What is it?

A company is considered to be insolvent if it is unable to pay its debts.

Company insolvency may be determined in 2 ways;

  • The Cash-flow Test – is the company now, or will it become unable to pay its debts as and when they fall due for payment
  • The Balance Sheet Test – are the company’s liabilities greater than it’s assets

When a company is insolvent and unable to pay it’s debts, the ASIC and the Corporations Act requires a director to address the question of insolvency in a timely and responsible manner strattera dosage.

Further, the law imposes a positive duty upon the director to avoid trading while insolvent. This means that before a new debt is incurred, directors must be able to satisfy themselves that the debt can be paid as and when it falls due for payment.

While company insolvency places positive legal duties on directors, there is no legal obligation to spend your own money to place a company into liquidation. Often a company does not have funds to appoint a liquidator.

So what are the choices?

Company Insolvency – Informal Options

Company insolvency may be addressed informally in a number of ways.

  1. Trade on but on a COD basis – you should not worsen the situation of the company or its creditors.
  2. Make individual or group arrangements with creditors to reschedule the debt to a level where the company can be considered solvent
  3. Introduce new funds into the company
  4. Raise equity
  5. Introduce new partners
  6. consider selling selected, non essential assets of the company to raise funds
  7. Sell the business of the company to discharge debts
  8. Cease trading

Company Insolvency – Formal Options

Company insolvency may be formally addressed by the appointment of ;

  1. A Voluntary Administrator selected by the directors.
  2. A Liquidator in a Creditors Voluntary Liquidation
  3. An Official Liquidator by the Court on the petition of an aggrieved creditor owed more than $2,000
  4. A Receiver or Receiver and Manager by a secured creditor
  5. A Provisional Liquidator
  6. an external administrator by the ASIC

The role of the liquidator

The liquidator in any formal appointment must investigate the affairs of the company and the conduct of the directors including their use of company funds and property.

If the directors have breached the Corporations Act, the liquidator must report those breaches to the ASIC.

A liquidator acts on behalf of the creditors of a company and will therefore take steps to:

  • protect and realise the assets of the company;
  • investigate and examine the affairs of the insolvent company
  • investigate the transactions the company has been involved in
  • report to ASIC on insolvent trading by the directors
  • report any other offences committed under the Corporations Act;
  • prosecute directors who fail to maintain company books and records
  • assess legal actions available to the company including insolvent trading or misuse of company assets by the directors

Call The Insolvency Experts

1300 767 525 anytime


Am I liable for company tax debts

 If you are trading through a PTY LTD company, the usual rule is that a director is not liable for the company’s debts – however there are a number of ways a director can become liable for company tax debts.

The Director Penalty Regime

The ATO has power to hold a director personally liable for company tax debts in certain specific circumstances.

The taxes involved are:

  • unpaid PAYG
  • unpaid superannuation guarantee payments

The penalty regime does not cover unpaid GST or company tax.

Director Penalty Notice 

To hold a director personally liable for company tax debts, the ATO must issue a Director Penalty Notice that informs a director that unless they comply with the notice within the specified time, they will be personally liable for company tax debts.

Compliance must be achieved within 21 days of the date on the notice, by the company doing one of the following:

  • paying the debt
  • appointing a voluntary administrator
  • appointing a liquidator

Failure to do one of the above within 21 days will lead to a director being personally liable for company tax debts.

A Director Penalty Notice works in 2 ways

First, where BAS & Super returns are up to date with all having been lodged within 3 months of the due date, a director is allowed 21 days to comply with the notice. If compliance is achieved, personal liability is avoided.

Second, where BAS & Super returns have been lodged more than 3 months after the due date, a director is immediately personally liable for the company tax debts. Personal liability cannot be avoided so if the company can’t pay, the director must pay.

Where no returns have been lodged, the ATO can issue an estimate of the amount it believes is outstanding and then issue a Director Penalty Notice based on that estimate.

Two types of Director Penalty Notices

  • Director Penalty Notice where 21 days is allowed to avoid personal liability
  • Director Penalty Notice with no escape of personal liability

If you have a tax debt, call The Insolvency Experts immediately on 1300 767 525

Company Liquidation

How We Saved a Director $110,000 and the Devestating Threat of Liquidation

The promise of a Cheap Liquidation is a popular myth in the business world.

More often than not, the unsuspecting Company Director is hit with financial liabilities that go way beyond the initial cost of liquidation and can even put his own personal assets at risk.

As this true story demonstrates, Voluntary Liquidation is not the only option. By speaking to an Expert in Liquidation, this Director was able to avoid a $110,000 liability for less than $500.

The Background

An accountant asked us to consult on whether liquidation was the best step for his client.

The client company had a number of supplier debts, and the directors believed that if a liquidator was to be appointed, those debts would be eliminated.

On meeting with a liquidator, the Directors were very tempted by the promise of a cheap liquidation at $3,300. Thankfully,  they did not act without the advice of their accountant, who suggested tha this client come and see us first.

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“Our advice saved this client up to $110,000 for a fee of less than $500! Not only did we prevent a Liquidation, the Accountant also retained his client.”
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Assessing the Risks

Our consultation started by examining the terms of the liquidators’ engagement letter. The letter revealed that the fee of $3,300 was only a contribution toward the cost of the liquidation.

The letter went on to disclose that the actual cost would depend on whether investigations revealed the existence of voidable transactions etc.

In other words, the payment of $3,300 did not release the directors from any liability that may exist for voidable transactions, insolvent trading or breaches of directors’ duties etc. All of which may have been pursued if identified by the Liquidator.

We then undertook a review of the company’s financial position, as well as all payments made by the company that involved the directors.

Through this work it became apparent the directors had recently applied all sale-of-business proceeds ($110K) to the repayment of a personal loan that was neither registered nor had priority overcreditor claims.

The Solution that Saved the Director

Having assessed the risks to the Director and completed our review, we were able to advise the client that liquidation was not in their best interests.

We also warned them that if they went down that path of Liquidation then the transfer of $110,000 would definitely have been pursued by the liquidator.

As a result, we formulated an alternate strategy that did not involve liquidation and that was better for the client.

The Lesson Learned

Liquidations that appear cheap at the outset are rarely ever cheap! Clients need to know that a liquidation cannot be performed for $3,300 or anything remotely close to that price!

Directors also need to understand that even when they pay to liquidate, they are not the client!

Liquidators are legally obliged to investigate, report to ASIC and, wherever able,pursue legal claims on behalf of the company and its creditors. The directors are often the prime targets of this work.

As the target of forensic investigations, it is entirely appropriate that directors seek advice from their perspective as to whether it is liquidation or another course of action that would produce the better financial outcome.

No matter how desperate the situation, liquidation is not the only option. It is only one of a range of options that must be considered.

Not only is an unplanned liquidation a traumatic experience, it may also be the wrong decision for you or your client.


What are the Alternatives to Bankruptcy?

If you are experiencing extreme financial hardship, there is no doubt you will be considering bankruptcy.


Firstly, it should be said that bankruptcy is about allowing a person in overwhelming debt to relieve themselves of the debt burden and to allow themselves a fresh start.

If you are experiencing overwhelming debt, or a level of debt you will never be able to recover from, then bankruptcy may be the most appropriate course for you.

Informal Alternatives to Bankruptcy

To relieve yourself of the debt burden, you have choices. You may consider formal options that include bankruptcy or informal options for dealing with your debt.

Your informal alternatives to bankruptcy may include;

Avoiding Creditors

This option does nothing to deal with the debts you have as they will not legally disappear just through avoiding your creditors.

By making a choice to avoid your creditors, you are simply hoping that they will not take legal recovery actions that may include legally enforceable judgments, garnishees, writs of execution or even bankruptcy.

Just saying this, while avoiding creditors is not the most comfortable or effective way of dealing with debt, it is a valid strategy and it will work in many cases.

Private Arrangements or Settlements with Creditors

As a debtor you have the right to reach a private arrangement with individual creditors or the group of creditors.

A private arrangement may involve an agreement to pay a debt by installments or by a once only agreed lump sum that is accepted in full and final satisfaction of a debt.

Whatever the arrangement, the settlement should be evidenced by a Deed of Release for your protection.

Issues with Informal Alternatives to Bankruptcy

While you may avoid some creditors, make installment agreements or settlements with other creditors, there will always be one or two creditors that do not accept your proposal.

And because you have chosen to deal with creditors informally, it means those more stubborn creditors are not bound to your proposals and therefore, they are still able to pursue their chosen legal recovery option.

If this occurs, you will need to find a way or satisfying the stubborn creditor or you may find yourself bankrupt. This may involve paying a stubborn creditor a higher return than you paid to others. It may also involve you making a formal application to have a court imposed installment agreement in response to any judgment obtained.

What are the formal alternatives to bankruptcy?

Formal alternatives to bankruptcy exist under the Bankruptcy Act and if the appropriate majority of creditors vote in favour of these arrangements, all creditors are bound to accept the proposal.

The formal alternatives a debtor may enter into under the Bankruptcy Act includes:

If you want to discuss what are the alternatives to bankruptcy for you

Call The Insolvency Experts on 1300 767 525


Can a director be liable for company tax debts?

In a word, Yes. A director can be held personally liable for company tax debts – specifically:

  • unpaid PAYG withholding
  • unpaid superannuation guarantee payments

How can a director be liable for company tax debts?

If the ATO wishes to hold a director liable for a company tax debt, it must issue a Director Penalty Notice strattera medication.

A Director Penalty Notice may be issued to the home address of the director as it appears on the ASIC register or to the company’s tax agent address.

It is the director’s responsibility to maintain these addresses and if the notice is not received and not complied with because of the directors failure, the penalty will stand and they will not be able to avoid personal liability for a company tax debt.

The Director penalty is equal to the amount of the outstanding debt owed by the company for unpaid PAYG and unpaid super.

[youtube]If a person received a director penalty notice, they may comply with it so long as they achieved one of the options allowed within 21 days of the date on the notice:

  • pay the debt in full
  • appoint a voluntary administrator
  • appoint a liquidator

If compliance is not achieved within 21 days, the director becomes personally liable for the tax debt of the company.

A Director Penalty Notice works in 2 ways

First, if all BAS & Super returns are up to date, all having been lodged within 3 months of the due date, even though there may be a debt for PAYG and superannuation, a director will be allowed 21 days grace in which to comply with the Director Penalty notice.

If compliance is achieved within 21 days, the director will avoid personal liability for the stated company tax debts.

Second, If all or some BAS & Super returns have been lodged more than 3 months after the due date for lodgement, a director will be automatically and immediately personally liable for the company tax debts.

In these circumstances, there is no avoidance of personal liability for the company tax debt.

The ATO will pursue the director for the unpaid PAYG and super debt of the company.

If a director has not lodged a return or indeed any returns, the ATO can issue an estimate of what it believes the debt is and then issue a Director Penalty Notice based on those estimates.

In short, if you are more than 3 months late in lodging your returns, you are personally liable for the amounts shown in a Director Penalty notice.