A company does not need to be insolvent in order to be wound up; they can apply for voluntary liquidation instead. The winding up can be initiated through either the members or the creditors under s491 of the Corporations Act 2001 (the Corporations Act), that is member’s voluntarily dismantle a solvent company. This occurs most often in April, May and June as Directors perceive a tax advantage in winding up a company.
What are the costs associated with winding up a solvent company?
Given that most member’s voluntary windup of a solvent company have no outstanding creditors and no assets but cash and loans that need to be distributed “in specie” (that is the distribution of an asset in its present form, rather than selling it and distributing the cash), the costs associated with this type of wind up are lower than other types.
How quickly can a liquidator be appointed?
A liquidator can be appointed as soon as directors and members are able to sign appropriate resolutions. If the company has two or less directors and members, this is a simple process. However, this process may be extended if there is a dispute between parties or there are members or directors who reside overseas.
What are the exceptions?
A major factor that a liquidator’s needs in a member’s voluntary wind up a solvent company is a tax clearance. Without a full tax clearance, a liquidator is unable to make final distributions (or any type of distribution) and will not be able to call a final meeting had deregister the company. The timeframe of a liquidation is fairly dependent on how long it takes the company to receive a tax clearance.
Ensure all of the company’s BAS, PAYG and income tax returns are filed with the ATO and pay all, if any, outstanding debts the company may have.
If you require further information on Voluntary Administration for your business, or other related Accounting or Legal advice, contact the experienced lawyers and accountants at The Quinn Group today. Call us on 1300 QUINNS (1300 784 667) or on +61 2 9223 9166 to arrange an appointment or submit an online enquiry today.
