Placing a company into liquidation has far-reaching effects on the company and on what it can and cannot do. Those effects will be set out in the company's constitution and also in the Corporations Act.
Most importantly, upon the appointment of a liquidator, all of the powers of the directors cease. The liquidator effectively replaces the directors. In practice, the liquidator will consult with the directors and shareholders and seek their views on issues that arise. The corporate structure and corporate powers of the company continue until it is dissolved.
It is usual that the company will have ceased to carry on its business prior to liquidation. Once the company is in liquidation, the company must cease to carry on business unless the liquidator decides it is necessary to carry on the business for a brief period in order to finalise its affairs.
The Corporations Act states that various acts of the company after the commencement of the liquidation will be null and void including any transfer of shares or transfer of the company's property, unless the liquidator consents.
Commonly, contracts are terminated by the commencement of the liquidation. Should a breach of contract have occurred as a result of the winding up, the other party will be a creditor in the liquidation.
During the liquidation, wherever the name of the company appears it must be followed by the words "in liquidation".
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