What happens when a company goes into liquidation in Australia?
When a company enters liquidation, it ceases to trade, and control of the business passes to a registered liquidator. The purpose of the liquidation is to realise the company’s assets and distribute any available funds to creditors in a fair and orderly manner.
1. Appointment of a liquidator
A liquidator is appointed by the company’s members and creditors, or by a court order. The powers of the directors cease, and the liquidator becomes responsible for managing the company’s affairs and protecting the interests of creditors.
2. The liquidator secures the company’s assets.
This can include bank accounts, inventory, equipment, property, and any money owed to the company by customers or other parties.
3. Creditors are notified.
Creditors are notified that the company has entered liquidation and are invited to submit a proof of debt to confirm the amount they are owed. The liquidator will provide reports to creditors outlining the financial position, progress of the liquidation, and any dividend payments.
4. The liquidator investigates the company.
The liquidator reviews the company’s books and records to understand the causes of insolvency and identify any transactions that may be recoverable for the benefit of creditors.
5. Assets are collected and sold.
Company assets are sold, and outstanding debts are collected where possible. The proceeds are distributed according to the statutory order of priority.
6. Funds are distributed according to priority.
Any available funds are distributed according to the statutory priority rules. This generally begins with secured creditors, followed by the costs of the liquidation, certain employee entitlements, and then unsecured creditors.
7. The company is deregistered.
Once the liquidation process is completed and all available funds are distributed, the liquidator finalises the administration, and the company is deregistered by ASIC and ceases to exist as a legal entity.
Do you have more questions about our Company Liquidation? Read our full guide here
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