Liquidation

What is a liquidation?

If a company is facing financial difficulty, its shareholders, creditors or the court can put the company into liquidation.

During a liquidation, a company’s affairs are wound up in an orderly and equitable way.

The process involves:

• realising the company’s assets
• cessation or sale of its operations
• distributing the proceeds of realisation among its creditors
• distributing any surplus among its shareholders.

What is a liquidator?

A liquidator is an independent and suitably qualified person who takes control of the company.  This role is to ensure that the affairs can be wound up in an orderly and fair way for the benefit of ALL creditors. The Australian Securities and Investments Commission administers a register of all suitably qualified liquidators.

What is the liquidator’s role?

The liquidator has a legislated duty to all the company’s creditors.

The liquidator’s role is to:

• collect, protect and realise the company’s assets
• investigate and report to creditors on the company’s affairs, including any:
  • unfair preferences that may be recoverable
  • noncommercial transactions that may be set aside
  • possible claims against the company’s officers
• inquire about the failure of the company, and report any possible offences by people involved with the company to the Australian Securities and Investments Commission
• distribute the proceeds of realisation (after payment of the costs of liquidation, and subject to the rights of any secured creditor) to:
  • priority creditors (including employees)
  • unsecured creditors
• apply for de-registration of the company on completion of the liquidation.

What are the different types of liquidation?

There are four types of liquidation:

• creditors’ voluntary liquidation
• official liquidation (court-appointed liquidation)
• provisional liquidation
• members’ voluntary liquidation.

• Are you a creditor needing more information about liquidation?
• Are you an employee needing more information about liquidation?