What is Court Liquidation?
A court liquidation is when the Court orders a company to be wound up and appoints a liquidator to take control of its affairs.
It is a legal process used to recover unpaid debts where other attempts to obtain payment have not worked.
It follows formal recovery action, kicked off by a statutory demand, where the company fails to respond or pay within the required timeframe.
This creates the legal basis to escalate the matter through the Court. At this point, the creditor may apply to have the company placed into liquidation.
The Process
Process starts (before statutory demand)
Typically, the process starts before a statutory demand is issued. A creditor will often first obtain a judgment through the Court, confirming that the debt is owed and the company is required to pay it.
Debt escalation and statutory demand issued
If the debt remains unpaid after the Court judgment, the creditor can escalate the matter. This is where a creditor’s Statutory Demand for payment is used.
Statutory demands are used where the debt is at least $4,000, clear, overdue, and has not been resolved through standard collection efforts.
21-day payment period
A statutory demand is a formal legal notice requiring a company to pay a debt within 21 days. It must comply with strict formalities under the Corporations Act 2001.
Non-payment triggers insolvency presumption
If the company does not pay, secure the debt, or apply to set the demand aside within that timeframe, it is presumed to be insolvent.
Court escalation and winding up
This allows the creditor to escalate the matter to the Court to have the company wound up.
What you need to do
To begin this process, we recommend you engage a lawyer. (We are not lawyers but can recommend one if you need)
Statutory demands and winding up applications must comply strictly with the Corporations Act 2001 and Court rules, so it’s best if they are prepared and handled by legal practitioners.
Your lawyer will:
- Draft and serve the statutory demand
- Advise on compliance and evidence requirements
- Prepare and file the winding up application if the debt remains unpaid
If the matter progresses to a Court application, a liquidator must be nominated.
Where Dissolve fits in
This is where Dissolve come in.
Our role comes when a liquidator needs to be nominated as part of the Court application.
When your lawyer is preparing the application, they will contact us to obtain a Consent to Act as Liquidator, which is required for the Court to consider the appointment.
We will review the circumstances and, if appropriate, provide that consent so the application can proceed.
Once appointed, the liquidator takes over the company and deals with its assets and creditor distributions.
Talk to Us
If a company owes you money and considering legal action, the first step is understanding how the process works and what is involved.
Court liquidation is a structured process that starts with legal action and requires coordination between your lawyer and a nominated liquidator.
Speak to us before you or your lawyer takes the next step.
Making the decision.
Deciding to liquidate a company can be difficult and stressful. We understand your business means a lot to you, and letting that go can be hard.
But a liquidation can also help in the following ways:
OUR
Team
Cliff Sanderson
PARTNER – DISSOLVE
Cliff is a corporate restructuring specialist with over 30 years of experience in Australia and internationally. He is the founder of Dissolve.
Brad Vincent
SENIOR CLIENT ADVISOR
After 15 years of being an advisor, Brad has developed an excellent understanding of the legal and practical issues facing a director of an insolvent company – it is rare for a director to throw a new situation at Brad.
Geoff Granger
PARTNER – DISSOLVE
Geoffrey has over 35 years’ experience in restructuring, turnaround and insolvency. As a registered liquidator, he has extensive experience in all areas of investigations and recoveries.
FAQ
What is a Statutory Demand?
A statutory demand is a legal demand for payment of a debt owed by a company. If the company does not pay, secure, or apply to set aside the demand within 21 days, it is presumed to be insolvent under the Corporations Act 2001 (Cth).
Do I need a lawyer?
Yes. Statutory demands and winding up applications must comply strictly with the Corporations Act 2001 and Court rules, so they are prepared and handled by a lawyer. Errors can invalidate your claim.
How does liquidation actually start?
In most cases, liquidation starts with a statutory demand. If the demand is not dealt within 21 days, the creditor can apply to the Court to have the company wound up. The Court then decides whether to wind up the company.
What does the liquidator do?
After being appointed, the liquidator investigates the company’s affairs, collects and sells assets, and distributes any available funds to creditors in accordance with the law.
Contact Us
Please either give us a call or submit the form and we will get back to you.