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Members Voluntary Liquidation

A members’ voluntary liquidation is a process detailed in the Corporations Act 2001 which allows a solvent company’s affairs to be wound-up.

A liquidator is appointed to sell the assets of the company, to pay all creditors and then distribute any surplus assets to the shareholders. In practice, we usually recommend that the affairs of a company be wound down by the directors prior to liquidation so as to save on liquidator’s fees.

At Dissolve we are experts in providing fast, efficient and low cost liquidations. Before liquidating your company you should CALL US to obtain FREE ADVICE and a FREE QUOTE for the liquidation of your company.

Or download our Guide to Solvent Company Liquidations.

Why Choose Dissolve?

• Low Cost - By focusing on a single, highly specialised service area, we are able to bring to bear our experience and professional judgment to develop highly streamlined systems and a timely service. Also, unlike other Registered Liquidators, we do not seek appointment to large or complicated assignments. Hence we are geared for smaller companies and so we don’t have any expensive overheads.
• No Conflict - Dissolve is free of the conflicts inherent in using a company's auditor to perform the liquidation of a group company. In many situations an audit firm should not be performing liquidation services for an audit client due to a conflict of interest.
• Fixed Fee - We sometimes speak to directors that are concerned about a liquidator’s fees using up all of the assets of the company so that priority creditors and other creditors receive no distribution form the liquidator. At Dissolve, we are happy to provide a fixed quote to cover the standard aspects of a company liquidation as long as we can establish:
  
  
  • What assets the company has and where they are located;
  • The number of creditors;
  • Any issues likely to complicate the liquidation
• Same-day Appointments - If a Director receives a Director Penalty Notice it requires the directors to take action within 14 days of issue or the director will be personally liable for the debt. If you are close to the 14 days expiring, you'll be pleased to know that we are able to organise the appointment of a liquidator within a couple of business hours.

The professionals at Dissolve can help. We are fully qualified Registered Liquidators with a wealth of experience. Our professionals will lead you through the company liquidation process to quickly release you from the workload and costs.

Timeline of a Members’ Voluntary Liquidation

At Dissolve we specialise in company liquidations. We are able to provide a fast, efficient and low cost company liquidation service. We have provided below a timeline for a members’ voluntary liquidation. You don’t need to worry about the detail – at Dissolve we prepare all the documents for you and lodge them on time to ensure the fastest possible liquidation at the lowest possible fee.

Why not CALL US NOW for FREE ADVICE and a FREE QUOTE on a members’ voluntary liquidation.

Step One - Corporate Simplification Review
Conduct a comprehensive review of matters to be attended to in order to position a company or group of companies for members’ voluntary liquidation.

Step Two - Meeting of Directors
At a meeting of directors a resolution should be passed that a Declaration of Solvency be signed and that a general meeting of members be called to consider the resolutions that the company be wound up, that the assets be distributed and that a liquidator be appointed.

Step Three - Lodgment of Declaration of Solvency
The original of the Declaration of Solvency must be lodged with ASIC before the date on which a notice of meeting of members is sent out.

Step Four - Notice to Members
Members must ordinarily receive 21 days notice of the proposed meeting unless a consent to short notice is obtained from members.

Step Five - Meeting of Members
At the meeting of members the following resolutions should be passed: that the company be wound up; that a liquidator be appointed; the amount of the liquidator’s remuneration; the date when the books and records of the company can be destroyed.

Step Six - Lodgment of Resolutions
The company must lodged the resolutions with ASIC within seven days and advertise the appointment of the liquidator in the Commonwealth Government Gazette within 21 days. Usually the liquidator will also place an advertisement in the Gazette, and advertise for any creditors who have a claim against the company.

Step Seven - Other Notifications
The liquidator then notifies a long list of interested parties of the liquidation.

Step Eight - Practical Matters
The liquidator will attend to a long list of matters to finalise the affairs of the company. This will include the finalisation of tax returns, realisation of assets, payment of creditors and the distribution of surplus assets to shareholders.

Step Nine - Annual Meeting
If the liquidation continues for more than 12 months an Annual Meeting of Members must be held.

Step Ten - Finalisation
When the affairs of the company are fully wound up the liquidator will call a Final Meeting of Members giving at least one months notice. That meeting is advertised in the Gazette. The liquidator will lodge with ASIC a Final Return within seven days and a Final Liquidator's Account of Receipts and Payments within 30 days.

Step Eleven - Deregistration
The company is automatically deregistered by ASIC three months after it receives the return for the final meeting.

Effects of Members' Voluntary Liquidation

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.

Members' Voluntary Liquidation v Deregistration

Company Deregistration is simpler, quicker and cheaper than a members’ voluntary liquidation. So why not always choose company deregistration?

Try answering the following questions:

• Do you want a high level of assurance that a company cannot be reinstated?
• Will any members of the company disagree on the proposed deregistration of the company?
• Is the company carrying on a business?
• Does the company have assets worth more than $1000?
• Does the company have any outstanding liabilities?
• Is the company a party to any legal proceedings?
• Did the company operate in a high-risk industry, for example, where public liability claims sometimes arise?
• Will any franking credits or tax free dividends be lost by the deregistration of the company?

If you said "Yes!" to any of the above questions, then we recommend a members’ voluntary liquidation rather than a company deregistration. Why not CALL US NOW for CONFIDENTIAL FREE ADVICE specific to your situation.

Company Deregistration

A company or the shareholders of a company can apply for the deregistration of a company by application to ASIC. This is a quick, cheap and simple method to dissolve a company where the relevant conditions are met. However, there are very few occasions when the process can be implemented.

Prior to applying for the deregistration of a company, the directors should address the same issues that are relevant to all corporate simplification reviews and members’ voluntary liquidations:

• Is corporate simplification appropriate?
• What are the tax issues?
• What actions are needed prior to winding up?

The application may be made by the company or any shareholder. A person applying for the deregistration of a company need not have any special qualifications. However, there are many tricks and traps for the inexperienced or unwary.

Is a Company Deregistration Appropriate?

The professional advisors at Dissolve have developed a Corporate Simplification Checklist to assist in conducting a detailed review prior to winding up the affairs of a company. If you decide the affairs of a company should be wound up, an application for deregistration can be made when all of the following conditions are met:

• all the members of the company agree to the deregistration; and
• the company is not carrying on business; and
• the company's assets are worth less than $1000; and
• the company has paid all fees and penalties payable under the Corporations Act; and
• the company has no outstanding liabilities; and
• the company is not a party to any legal proceedings.

Timeline of Company Deregistration

At Dissolve we specialise in company deregistration. We are able to provide a fast, efficient and low cost company deregistration service. We have provided below a timeline for a company deregistration. You don’t need to worry about the detail – at Dissolve we prepare all the documents for you and lodge them on time to ensure the fastest possible deregistration at the lowest possible fee.

Step One - Corporate Simplification Review
Conduct a comprehensive review of matters to be attended to in order to position a company or group of companies for deregistration.

Step Two - Meeting of Directors
If the company meets the requirements for deregistration, lodge Form 6010 Application for Voluntary Deregistration of a Company with the application fee.

Step Three – Receive ASIC response
ASIC will advise when the application is approved and publish a notice of the proposed deregistration in the next Commonwealth of Australia ASIC Gazette (ASIC Gazette).

Step Four – Deregistration
Two months after the notice is published, ASIC will deregister the company unless ASIC receives a request to defer or cancel deregistration of the company.

Effects of Company Deregistration

The main consequences of deregistration are that the company ceases to exist as a separate legal entity and any undistributed property of the company “vests” in ASIC. That is, after deregistration, ASIC will be the party who deals with any assets of the company. For this reason, all assets of the company should be transferred prior to the deregistration application being lodged.

Who can apply for Company Deregistration

The legislation relating to the deregistration of a company is liberal in that an applicant does not require any specific qualifications. The applicant must be the company, a director of the company, a member of the company or a liquidator of the company.

The practicalities are that an applicant needs to be concerned about a number of statutes such as the Income Tax Assessment Act, Fringe Benefits Tax Assessment Act and the Stamp Duties Act. Therefore, in practice, in many cases the process is handed over to a specialist with the relevant experience.

Any proposed deregistration applicant should make themselves very familiar with the full range of responsibilities and powers in making the application.

The professionals at Dissolve have the experience to simplify your corporate structure, and to avoid the many pitfalls that may be experienced by the unwary. Why not CONTACT US NOW for CONFIDENTIAL, FREE ADVICE.

ASIC initiated Company Deregistration

Under the Corporations Act 2001, ASIC has the power to "strike off" a company. ASIC is quite active in initiating the deregistration of companies. "Strike off" refers to the removal of the company name from the company register, resulting in its dissolution.

This method is used by ASIC when it believes that a company is not in operation, is not carrying on a business or has ceased to carry on a business.

To strike off a company, ASIC sends a letter to the registered office of the company stating that if no reply is received within one month, then a notice will be published in the Commonwealth Government Gazette, with a view to striking the company off the company register. If ASIC doesn’t receive a reply then the notice is published in the Gazette, another letter is sent to the company, and then unless it is shown within three months that the company is still in business, ASIC strikes the company off the register.

Commonly, a company misses the notices from ASIC and is inadvertently struck off the register. It is possible to have a company reinstated in some circumstances.

At Dissolve we are experienced in applications for reinstatement and we would be happy to lead you through the process.

Fees for Company Deregistration

The cost of a company deregistration varies according to a number of factors, particularly the size and complexity of the tax issues, the programme of asset realisation and the nature of the assets. The professional fee for the actual deregistration process is very low – the professional attention is needed in getting a company to the stage where it qualifies for a deregistration.

At Dissolve, by focusing on a single, highly specialised service area, we are able to bring to bear our experience and professional judgement in a systematised way and provide a streamlined and timely service. Because of our focus, we are often able to provide our service at a fee often half that of other service providers. Why not CONTACT US NOW for CONFIDENTIAL, FREE ADVICE.

As a guide, a relatively uncomplicated, single company deregistration costs around $500-$1000 plus a small amount for out-of-pocket expenses. Where a group of companies is involved, considerable efficiencies are possible and a lower fee per company can be achieved.

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".

Who can act as Liquidator?

At Dissolve we specialise in company liquidations and we are not part of a large accounting or audit practice. So you can be sure that we can act as Liquidator as we have NO CONFLICTS OF INTEREST. If you are considering using your auditor as your liquidator you are approaching a potentially complicated area. At Dissolve we say it is best not to use your auditor as your liquidator. But if you are considering that, read on to see who can legally act as the liquidator of your company.

The Corporations Act dictates who can act as the liquidator of a company. The general rule is that a liquidator must:

• be a natural person;
• be a registered liquidator with ASIC;
• not owe the company more than $5,000;
• not be owed by the company more than $5,000;
• not be an auditor of the company or a partner of the auditor;
• not be an employee or “officer” of the company, that is, not a Director, Secretary, or receiver and manager of the company;
• not be an officer of any company that is a mortgagee of property of the company;
• not be a partner or employee or employer of an officer of the company.

Where the company to be liquidated is a proprietary company, many of the above provisions do not apply. In the case of a proprietary company the liquidator must:

• be a natural person;
• not owe the company more than $5,000;
• not be owed by the company more than $5,000.

So the legislation relating to the members' voluntary liquidation of a proprietary company is liberal in that a liquidator does not require any specific qualifications. However, the practicalities are quite different in that the process could involve the movement of large sums of money and there is a need to be concerned about a number of statutes such as the Income Tax Assessment Act, Fringe Benefits Tax Assessment Act and the Stamp Duties Act. Therefore, in practice, in the vast majority of cases the process is handed over to a registered company liquidator who will have the relevant experience.

In the past it was common practice for a company to turn to its auditor to act as liquidator of a company within the group. In recent years there have been a number of laws and ethical pronouncements of professional bodies that restrict the services an auditor can provide to an audit client. The pronouncements of the professional bodies and the laws of various jurisdictions are quite complex. Dissolve has the following view:

• If a subsidiary company is being liquidated and it has assets of any value then neither the auditor nor a partner of the auditor should act as the liquidator. The principle underlying this view is that an auditor should never conduct transactions on behalf of an audit client or enter into transactions with an audit client as the counterparty.
• If a company is registered with the SEC in the USA then an accounting firm that is the auditor of the group should not allow another partner of that firm to act as liquidator irrespective of the value of any assets remaining in the company.

Any proposed liquidator should make themselves very familiar with the full range of responsibilities and powers of a liquidator and the stringent duties imposed on the liquidator.

Court Involvement

As a general rule, a liquidator is given wide powers and responsibilities and so it is not necessary to involve the court in a members’ voluntary liquidation. However, during the liquidation a creditor or member may ask a court to address specific questions that arise in the winding up, review the liquidator’s remuneration or exercise any power that a court possesses in a compulsory winding up.

Also, at any time during a members’ voluntary liquidation the liquidator might form the opinion that the company will be unable to pay its debts in full, in which case they must either apply to the court for the official liquidation of the company, appoint a voluntary administrator or convene a meeting of creditors.

Fees – Liquidator’s Remuneration

The cost of a members’ voluntary liquidation varies according to a number of factors, particularly the size and complexity of the tax issues, the programme of asset realisation and the nature of the assets.

At Dissolve, by focusing on a single, highly specialised service area, we are able to bring to bear our experience and professional judgement in a systematised way and provide a streamlined and timely service. Because of our focus, we are able to provide our service at a fee often half that of other service providers. Where a group of companies is involved, considerable efficiencies are possible and a low fee per company can be achieved.

We like to quote on each job specifically, but as policy our fee for a Members Voluntary Liquidation will be half of any quote you obtain from a Big4 Accounting firm. Why not CALL US NOW for CONFIDENTIAL, FREE ADVICE.

Liquidation of Listed Investment Companies ("LICs")

There are currently over 60 LICs on the Australian Stock Exchange. Dissolve has recently conducted a review of the sector. We examined 43 well known LICs to compare their share price to their stated Net Tangible Assets. This is a common analysis designed to determine if the LIC is trading at a premium or discount to its NTA.

The results were somewhat surprising. As at the end of September 2008, only two of the LICs we examined were trading at a premium to their Net Tangible Assets ("NTA") with the remaining 41 trading at a discount to their NTA. The average discount to NTA was 24% with the highest being 64%.

This creates the very frustrating situation for shareholders in the LIC. By way of example, for an average LIC, a shareholder can sell their shares on market at 76 cents while the LIC sits on assets worth $1.00.

There is an easy solution. The LIC can sell its assets and return the capital to shareholders by way of a members voluntary liquidation. In the example above, this would lead to an immediate improvement in the shareholders position of around 40%. Some value would be lost in the sale and liquidation process that may reduce the 40% slightly.

The counter argument from the LIC may be that they expect the next year or two to be a great time to buy shares and so the shareholders should leave their money in the LIC. For us, that doesn't make sense as the LIC will be starting from a position where they must get a 40% return, and for that to be fully reflected in the LIC's share price, before they get to the starting position for a shareholder in the liquidation scenario.

Our analysis is that for a large number of shareholders in LICs they would be significantly better off if the LIC would liquidate its assets and distribute the funds.

If you are a shareholder in an LIC you may wish to discuss the position of your LIC with one of our Registered Liquidators. Why not CONTACT US NOW for CONFIDENTIAL, FREE ADVICE.

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