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Frequently Asked Questions

Frequently Asked Questions

When a company encounters financial distress there are two options: liquidation or Voluntary Administration.

Liquidation is the winding up of a company and its business which ends when the company is deregistered by ASIC.

Liquidation can apply to insolvent companies as well as solvent businesses. A liquidation can occur either involuntary or voluntary. A creditor can initiate liquidation of the company on an involuntary basis, through the courts, if the company refuses or declines to pay any amount owed exceeding $2000. Alternatively, a company, through its directors and members can initiate liquidation on a voluntary basis. Appointing a Liquidator on a voluntary basis clearly has advantages as you can avoid the stress and hassle of court and you can also appoint a Liquidator of your choosing (rather than allowing the creditor to nominate a Liquidator of their choosing).

A Company Liquidation involves the company’s assets being collected and realised. The proceeds will initially be used to pay for the liquidation process and if there is any surplus, a dividend will be declared and paid to the creditors on a pro-rata basis.

A Voluntary Administration provides companies with a flexible procedure to allow company directors to act quickly without the need for member approval if the company is insolvent or is likely to become insolvent in the near future. The process provides companies the time to develop and implement strategies to restructure its debts under the independent supervision of a Registered Insolvency Practitioner. The main benefit of a Voluntary Administration is that it provides the company an opportunity to continue operating subject to creditor approval of the restructuring plan.

An Insolvency Practitioner, otherwise known as a Voluntary Administrator, steps in to assume full control of the company’s business and will report to creditors with their findings on the financial position of the company. During this period the directors will have the opportunity to propose a Deed of Company Arrangement if they wish to restructure the financial position of the company.  If the directors or any other parties decline to submit a proposal for a Deed of Company Arrangement the company will most likely proceed into Voluntary Liquidation.

Voluntary Administration is internationally viewed as a successful financial restructuring tool which has helped many Australian businesses to survive. Voluntary Administration is an expensive process so it is not suitable for all businesses. As a result we advise our clients to proceed down this path only if the business is financially viable and can be restructured. If the underlying business is not financially viable then we recommend that the company be placed directly into Voluntary Liquidation to avoid unnecessary costs.

For more information about Company Liquidation or Voluntary Administration please call us for FREE advice on 1800 210 073.

The term business bankruptcy is a misnomer as the legal term for a business failure is a “company liquidation”.

Company directors with business debts or tax debts should seek the advice from a registered company liquidator.

Call us today if you would like any more information on what is business bankruptcy on our toll FREE advice line on 1800 210 073.

The purpose of having a company is to separate the liabilities owed by the company from its directors. However, in certain circumstances a company director can personally become liable for business debts, if the director has done one of the following:

  • signed a personal guarantee to secure payment of a business debt;
  • incurred a debt knowing the company was insolvent;
  • failed to lodge Business Activity Statements on-time with the Australian Tax Office; or
  • failed to comply with a Directors’ Penalty Notice issued by the Australian Tax Office demand within time.

If a company director has become personally liable for a business debt and cannot pay that debt, the director may need to consider personal bankruptcy.

Call us today if you would like any more information about business debts on our toll FREE advice line on 1800 210 073.

Liquidators are qualified insolvency specialists who are licensed by ASIC to wind up failed or insolvent companies. To become a Registered Liquidator you will need to hold a suitable accountancy degree and also be a member of the Chartered Accountants Australia & New Zealand, CPA Australia or Institute of Public Accountants. Registered Liquidators will also need to have completed the Advanced Certification offered by the Australian Restructuring Insolvency and Turnaround Association and become active members.

Before a person can provide company liquidation services they are required to be registered with the Australian Securities and Investments Commission (ASIC). ASIC regulates all liquidators and they are required to file many documents with ASIC in all liquidations. Liquidators are also required to file an annual return with ASIC. You can search the national register of liquidators by clicking here.

Here at CRS Insolvency Services our partners are fully registered and licensed to offer all insolvency services.

Call us today if you would like any more information about a Registered Liquidator on our toll FREE advice line on 1800 210 073.

A business debt is normally known as a debt which has been incurred by a company. A debt can be incurred on behalf of a company by its directors or by its employees. A company can only be liable for a business debt if the debt was authorised by the person who had authority to incur the debt on behalf of the company.

Call us today if you would like any more information about what is a business debt on our toll FREE advice line on 1800 210 073.

It is the role of a liquidator to thoroughly review and investigate the records of the company and to review payments made within the prescribed period of the company being wound up. If a payment is considered preferential or uncommercial it may be recovered by the liquidator in certain circumstances.

Call us today if you would like any more information about what payments can be clawed back a liquidator on our toll FREE advice line on 1800 210 073.

A Director’s Penalty Notice (DPN) is issued by the Australian Taxation Office (ATO) and will be issued to the director’s residential address as registered with the Australian Securities and Investments Commissions (ASIC). For that reason it is imperative that directors maintain their current residential address details with ASIC.

It is important to note that the ATO can issue 2 types of DPNs.

The first type will allow you 21 days to choose from the following options:;

  • Pay the debt in full; or
  • Enter into an instalment arrangement to pay the debt; or
  • Place the company into Voluntary Administration; or
  • Place the Company into Liquidation.

If the twenty one (21) day period expires and the director has not implemented one (1) of the four (4) options then the director will become personally liable for the amount listed in the notice.

The second type of DPN is a lock down notice. Once a lock down notice has been issued, personal liability cannot be avoided and the director will become personally liable for the debt set out in the notice.

Furthermore, directors need to be aware that the business activity statements are more than 3 months overdue directors become personally liable for unpaid PAYG and employee super contributions.

If you have received a DPN you should call CRS immediately for expert advice on 1800 210 073.

It is important to note that before the liquidator can finalise the winding up, the appointed liquidator will need to receive a clearance from the Australian Securities and Investments Commission (ASIC). Once approved the liquidator will lodge final accounts with the ASIC provided and three (3) months after that the company will be automatically deregistered by the ASIC.

Call us today if you would like any more information about how and when a company liquidation ends on our toll FREE advice line on 1800 210 073.1800 210 073.

There is no set time limit and a liquidation may last from 6 months to many years depending upon the complexity of the issues involved. In most circumstances, the liquidator will usually try to finalise the liquidation within twelve (12) to twenty four (24) months.

Call us today if you would like any more information about how long does the liquidation last on our toll FREE advice line on 1800 210 073.

The Commonwealth Government provides an employee safety net for employees of failed businesses. The scheme is set out in the Fair Entitlements Guarantee Act 2012 (FEG Act) and seeks to provide a scheme of last resort for employees who have lost their employment as a result of the insolvency of the company and their entitlements cannot be paid by the appointed liquidator.

The FEG scheme will pay out claims (limits apply) in respect of the following entitlements:

  • Unpaid and underpaid wages (up to thirteen weeks)
  • Unpaid annual leave;
  • Unpaid long service leave;
  • Unpaid pay in lieu of notice (up to five weeks); and
  • Unpaid capped redundancy pay (up to four weeks per year of service).

The FEG Scheme does not pay out unpaid superannuation and employees should be aware that the scheme will not pay their entitlements if they resign after the insolvency practitioner handling the insolvency of the employer has been appointed.

Further information can be obtained through the FEG Hotline on 1300 135 040 or visit their website at https://www.jobs.gov.au/fair-entitlements-guarantee-feg

Credit reporting agencies will record a company Liquidation against a former director’s personal credit file. In our experience the listing will get removed once the liquidation has been finalise. If your company is insolvent it is important that you can demonstrate that you acted in an appropriate manner and complied with corporate laws.

Call us today if you would like any more information about how a company will affect your personal credit rating on our toll FREE advice line on 1800 210 073.

If you have been a company director and you have been involved in two (2) or more companies within the last 7 years which have been placed into liquidation, then the Australian Securities Investment Commission (ASIC) may consider a director banning order against you. ASIC may also issue a director banning order if it has other grounds like:

  • You have been convicted of fraud.
  • ASIC has reason to believe that the person does have a good fame or character; or
  • ASIC has reason to believe that the person is not adequately trained, or is not competent

If you received a director banning order, this would mean that you would be unable to act as a company director or take part in the management of a company for the time period set out in the notice. The usual time period for a banning order is between one (1) to five (5) years, however it can be up to ten (10) years. A director banning order is not automatic and if you receive a notice setting out ASIC’s intention to issue an order, you will be given an opportunity to appear at a private hearing and make submissions on the matter.

Furthermore, if you become personally bankrupt you would be unable to act as a company director or take part in the management of a company for the time period of your bankruptcy.

Call us today if you would like any more information about director disqualification on our toll FREE advice line on 1800 210 073.

CRS Insolvency Services are happy to discuss an agreed fee to place your company into liquidation.

By way of background most Liquidators calculate their remuneration by applying hourly rates.  In more straightforward cases, where the company has ceased to trade and has no assets, many liquidators are happy to agree to an up-front contribution for their expected fees and expenses. This contribution will be paid by the directors or shareholders personally and is fixed. If the company is still trading or has assets to realise or has complex legal issues then most liquidators will pay their remuneration from the assets realised. All liquidators must obtain approval from the creditors or the court before they can draw their remuneration.

At CRS Insolvency Services, we are highly competitive on fees and would be more than happy to discuss a fixed contribution to accept the appointment as liquidator.

Call us today if you would like to discuss the costs of placing my company into liquidation on our toll FREE advice line on 1800 210 073.

The law stipulates that a company liquidation must be carried out by a Registered Liquidator. This is to protect the interests of all stakeholders. The liquidator must be independent and has a duty to act impartially for the benefit of all creditors. The liquidator has a number of statutory duties to carry out and we list some of them below (these are not exhaustive):

  • To protect and to realise the assets of the company
  • To investigate the affairs of the company and report any wrong doings such as potential claims for preferential payments, insolvent trading or any other breaches of the Corporations Act to the Australian Securities and Investments Commission (”ASIC”).
  • Establish the reason for the company’s failure and to report these findings to ASIC
  • To distribute any surplus funds (after the costs and expenses of the liquidation have been paid) to the employees and thereafter the unsecured creditors on a pro-rata basis.
  • After the affairs of the company have been fully dealt with and ASIC has provided the liquidator with a clearance the liquidator must hold a final liquidation meeting of members and the creditors.

Call us today if you would like to discuss the role of the liquidator on our toll FREE advice line on 1800 210 073.

If a company of which you are a director of is placed into liquidation (either voluntarily or through the Courts) you will need to complete and submit a Report on Company Activities and Property (ROCAP).  The ROCAP must be lodged with the liquidator who will lodge part of it with ASIC.  A ROCAP must contain all financial information about the company’s affairs.

Furthermore, directors must fully co-operate with the liquidator and provide all reasonable assistance which the liquidator may require from time to time.

For this reason it is important that you select a liquidator that you believe you will be able to work with in a professional capacity. CRS Insolvency Services pride themselves on high client service standard and we will always act in a very professional manner, regardless of the situation.

The liquidator will require the books and records of the company and you will also need to attend the first liquidation meeting.

Call us today if you would like to discuss what obligations you will have if you place your company into liquidation on our toll FREE advice line on 1800 210 073.

A Liquidator or a Bankruptcy Trustee are obliged to pay creditors in a strict order as set out in the Corporations Act and the Bankruptcy Act. If a company has been wound up by the Court or a person has been made bankrupt, the petitioning creditors’ costs will be paid first (i.e. the legal fees to wind up the company or make a person bankrupt), otherwise it is usually the Liquidator’s or Trustee’s costs and expenses which get paid as a priority. After the costs of the liquidation or bankruptcy administration expenses have been paid any outstanding employee entitlements must then be paid as a priority above general unsecured creditor claims. If there are sufficient funds after all of the costs of the liquidation or the bankruptcy administration and employee claims have been paid in full, then ordinary unsecured creditor claims will be paid.

If the company in liquidation or the bankrupt estate does not have sufficient funds to pay unsecured creditor claims in full, then ordinary unsecured creditor claims will be paid on a pro-rated basis.  Pro rata means that creditors will not receive 100 cents in the dollar.  By way of an example assume that a liquidator or Bankruptcy Trustee only has $20,000 available to pay a dividend but has admitted claims totalling $100,000, creditors would only receive 20 cents in the dollar for every dollar claimed, or 20% of their claim.

Call us today if you would like to discuss the priority of payments in a liquidation or bankruptcy on our toll FREE advice line on 1800 210 073.

A liquidator may decide to trade a business if the liquidator believes it would be in the best interests of all creditors to do so. The liquidator would usually do this if he or she assesses that the business is able to be sold as a going concern or will result in a better return for creditors. A liquidator cannot trade a business for longer than 3 months without getting the approval of the creditors or the court.

Call us today if you would like to discuss placing your company into liquidation on our toll FREE advice line on 1800 210 073.

Upon the appointment of a liquidator, all legal actions against the company are stayed and cannot be re-instituted without leave of a Court.

Creditors lose their individual rights to recover debts directly from the company, but are able to prove their debts and share in any distribution made by the liquidator.

Call us today if you would like to discuss the effect of the liquidation on unsecured creditors on our toll FREE advice line on 1800 210 073.

Normally a liquidation of a company does not affect the rights of a secured creditor. The only exception to this general rule is if the secured creditor surrenders their security and proves in the liquidation for their entire claim. Usually a secured creditor will take active steps to secure and realise their security and prove in the liquidation for any shortfall after selling the security.

Call us today if you would like to discuss how a liquidation affects the rights of secured creditors on our toll FREE advice line on  1800 210 073.

Upon their appointment, liquidators take control of all assets of a company. The liquidator has authority to sell any asset owned by the company or can sell the entire business as a going concern (if it is viable to do so). Ultimately, the liquidator will realise all of the company’s assets and look to distribute any surplus funds (after the costs of the liquidation) to creditors who have proven their claims.

Call us today if you would like to discuss how a liquidation works on our toll FREE advice line on 1800 210 073.

The liquidator must complete a minimum level of investigations whether or not there are funds in the liquidation. The Liquidator must then report the findings of their investigations to the Australian Securities and Investments Commission pursuant to Section 533 of the Corporations Act. Some of the issues that this confidential report will include:

  1. The history of the company and the reasons for its failure;
  2. Provide a detailed report covering claims by employees, secured and unsecured creditors and the nature of the debts incurred;
  3. Report on whether the directors have traded the company whilst it was insolvent;
  4. Report on whether the directors made any preferential payments to creditors which may be recovered;
  5. Report on any offences the directors may have committed in accordance with the Corporations Act;
  6. Report on whether the directors have previously been involved in a liquidation and whether they should be banned from acting as a director.

The liquidator is also able to publicly examine directors and other witnesses in court.  Other powers of the Liquidator include the search and seizure of company assets and company records.

Call us today if you would like to discuss the investigation powers of a liquidator on our toll FREE advice line on 1800 210 073.

The definition of insolvency is when a company “cannot pay its debts as and when they fall due for payment”.

The primary test of insolvency is based on cash flow of the company. Therefore if a company “is asset rich but cash flow poor” then the assets of the company will need to be realised urgently or financed to pay the outstanding debts of the company.

A company may also be deemed to be insolvent if it fails to comply with any statutory demand issued against it. Usually, a company will be deemed insolvent if it fails to comply with a statutory demand issued under Section 459E of the Corporations Act. A company may also be deemed to be insolvent if it has failed to maintain proper books and records.

What is Insolvent Trading?

A director must not allow a company to incur debts when they know, or should be aware that the company cannot pay its debts as and when they fall due for payment. If the company is wound up and it can be established that there has been insolvent trading, the directors can be held personally liable to compensate the company for the amount “incurred whilst it was insolvent”. Both the liquidator and the creditors (with the liquidator’s permission) can sue a director for insolvent trading.

Who controls the liquidation process?

Liquidations are controlled by liquidators who are registered company liquidators with the Australian Securities and Investments Commission.

What are the liquidator’s powers?

The powers of a registered company liquidator are extensive and are set out in the Corporations Act. Briefly, the liquidator has all the powers that the directors formerly had together with additional powers to investigate and examine the affairs of the company and realize the company assets for the benefit of creditors. In addition, liquidators have additional powers to exam the directors and others persons associated with the company. A liquidator can also commence proceedings to recover monies for:

  • unfair preferences
  • uncommercial transactions
  • unreasonable director related transactions

Call us today if you would like to discuss if your company is insolvent on our toll FREE advice line on 1800 210 073.

You should consider placing your company into liquidation if it is insolvent. At CRS Insolvency Services we assist you in determining whether your company is insolvent or not. We provide this service 24 hours 7 days a week over our toll FREE telephone line. Call us now on 1800 210 073 if you have an urgent company liquidation enquiry. This service is FREE of charge and without obligation and your call will be answered by a senior member of our firm.

In many cases, directors delay the process unnecessarily and in doing so you could put themselves at risk of becoming personally liable for business debts. If you are concerned about the insolvency of your company, it is critical that you act early and consult with a registered insolvency professional.

Call us today if you would like to discuss placing your company into liquidation. In most cases we can agree a fixed fee. Call our toll FREE advice line on 1800 210 073.

A company can be wound up by resolution of its directors and shareholders (when done voluntarily), or by a Court if an application is made by one or more creditors.

  1. If a company is wound up by the Court the applicant must prove the company is insolvent. The Court then appoints a liquidator who is usually nominated by the petitioning creditor or is selected from the court’s list of official liquidators. The Court may also place a company into liquidation when a dispute between shareholders or members is unable to be resolved by any other means.
  2. If a company is wound up voluntarily by its directors and shareholders then they have the opportunity to select and nominate the liquidator of their choice.
  3. A liquidator can also be appointed at the end of the Voluntary Administration process by a majority resolution of creditors.

Call us today if you would like to discuss placing your company into liquidation, call our toll FREE advice line on 1800 210 073.

A liquidation or a voluntary administration of a company will be necessary if it has become insolvent.

If your company is insolvent and you are a director then it is your responsibility to take positive steps to prevent the company from trading whilst it is insolvent. If your company is insolvent you will need to make the appointment as soon as practical. To understand the differences between liquidation and voluntary administration please call us now!

If your company is insolvent and you fail to prevent your company from incurring debts by placing it into administration or liquidation then as a director you could become personally liable for the debts which your company has incurred.

Call us today if you would like to discuss placing your company into liquidation. Call our toll FREE advice line on 1800 210 073.

There are a many reasons why directors place a company into Liquidation. These reasons include:

  1. The company is insolvent and is unable to pay all of its debts as and when they fall due.
  2. The directors wish to avoid any claims for trading whilst insolvent.
  3. The Liquidation process protects creditors’, employees, directors’ and members’ interests.
  4. Allowing a company to simply be struck off ASIC’s corporate register provides no certainty that creditors will not re-register a company and pursue the director in the future.
  5. The director of the company may have been served a Director’s Penalty Notice by the ATO. If this notice is allowed to expire without appropriate steps being taken, a director may become personally liable for the company’s tax debt.
  6. The shareholders want to bring the company’s life to an end and distribute the retained earnings and paid up capital of the company.
  7. The company may be part of a larger group of companies which needs to be restructured.

To bring to an end the overwhelming stress of a company continuing to trade whilst incoming losses and unable to discharge its liabilities.

Liquidation is a process by which the affairs of a company are brought to an orderly end by a registered company liquidator. This involves the sale of the company’s property which is then distributed in a fair and equitable manner to creditors. The distribution of property of the company must be in accordance with strict rules imposed upon the liquidator by the Corporations Act. A company is usually placed into liquidation when it is insolvent (i.e. unable to pay its bills as and when they fall due).  A company can also be placed into liquidation for other reasons, for example the company can no longer function due to a dispute between the directors or the shareholders who wish to distribute the retained earnings and paid up capital of the company.

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