Finance with Pending Wind Up
Liquidation Proceeding - Also Known As Business Wind Up
Winding up is a process where a company’s outstanding matters are finalised and the company ceases trading.
There are different types of wind up proceedings which essentially are split between whether the company intended to be wound up is deemed as solvent or insolvent.
Winding up a solvent company
A solvent company must be is a position to pay all its debts within a 12 month period and the directors make a declaration of solvency under a form 520 (ASIC). It is an offense under the corporations act 2001 to make a false declaration for solvency. We advise obtaining professional advice prior to making a declaration for solvency or proceeding with any wind up actions.
The liquidator can then begin winding up the company and lodge the appropriate documentation during the 12-month period. If at any time the liquidator believes the requirements for winding up a solvent company cannot be met, they must either convene a meeting of creditors, apply to the court for the company to be wound up in insolvency, appoint voluntary administrator.
Winding up an insolvent company
There are number of different requirements when an insolvent company is being wound up. The most important is that the company cannot trade or conduct business as usual, as it can result in civil penalties or criminal charges under the corporations act.
A liquidators job is to take over control of the insolvent company and is required to ensure that creditors are treated fairly. The liquidators job is to liquidate the company assets and pay back a fair distribution to the creditors.
It is important to employ the services of a professional insolvency practitioner to assist in determining if your company is solvent, insolvent and the steps required to move your company through this transition.