Liquidation is the process of closing down a company. The decision to liquidate a company depends upon a lot of factors and does not depend on one single person. There are a lot of parties involved especially if the company is a big one.
What Happens During the Liquidation Process?
If you are planning to liquidate your company, then you might need to understand the entire liquidation process. Liquidation generally happens when your company fails to pay off its debts to the creditors, which in turn leads to selling off assets of your company.
When the company goes into liquidation, a liquidator is appointed to assess the situation. If you live in Australia, you can get in touch with credible companies like The Insolvency Experts located in Gordon, Australia. The company is ASIC licensed and regulated, and you can be assured that you will be dealing with a team of skilled professionals. They even have a 24-hour helpline wherein you can directly talk to their experts.
The liquidation can either be compulsory wherein the creditors can issue a Winding up petition. If the debt is not paid within a week, your company can be forced into liquidation by the court. In such cases, the parties involved into issuing the winding up order include:
- The Australian Securities and Investments Commission (ASIC)
It can also be voluntary wherein you and your creditors decide to liquidate the company after assessing the entire situation.
When a liquidator is appointed, their role is to:
- They will share all the relevant information about your company with the creditors
- They will deal with any outstanding contracts of your company
- Investigating about your company to check for criminal offences and reporting the same to ASIC
- Maintaining proper records and books of the company
- They can commence a recovery process if they find any hidden assets that need to be recovered
- If the liquidator has any funds, they will pay the dividends to the creditors
- They will prepare a final report and share the documents with the ASIC
- ASIC based on these documents will deregister your company
Role of Creditors and Directors in the Liquidation Process
Each party involved in the liquidation process has a role to play. Creditors have the right to:
- Hold a creditors’ meeting to approve or replace the appointed liquidator
- They can do a background check on the liquidator
- They can even form a creditors’ liquidation committee to oversee the entire liquidation process
- They can even claim possession of goods from the company with the right evidence
Directors on the other hand, need to completely support the liquidators and provide the required information about your company. Whenever any meetings are held, they need to be present. Shareholders have very less involvement in the liquidation process.
A lot of thought needs to go when it comes to make a decision to liquidate the company. Liquidation needs to be the last resort when all other options to pay off debts have been exhausted.