HOMEWhat to do when your company is in liquidation?
What is Liquidation?
Liquidation is the process by which a company is wound up in an orderly manner. A company is considered insolvent if it can no longer pay its debts when they fall due and the kind of liquidation the company will enter into will depend on its financial situation. The purpose of liquidation of an insolvent company is to have an independent and suitably qualified person (the liquidator) take control of company affairs. Company directors have a positive duty to prevent the company from engaging in trade and business affairs whilst it is insolvent. Whether you are a director, creditor or employee, if you suspect that your company may be insolvent based on reasonable grounds or if it will become insolvent as the result of incurring the debt, contact us immediate to discuss your situation with our experienced commercial lawyers.
There are two types of liquidation: (1) creditors’ voluntary liquidation; and (2) court appointed liquidation.
A creditors’ voluntary liquidation begins when creditors vote in favour of liquidation following a voluntary administration or when the insolvent company’s shareholders resolve to liquidate the company by appointing a liquidator. Such voluntary liquidation ensures the orderly realisation and distribution of the company’s assets among its creditors and delves into investigations as to why the company failed in the way that it did.
In a court appointed liquidation, a liquidator is appointed by the court to wind up a company following an application, usually made by a creditor, director, shareholder or ASIC. This type of liquidation allows for a systematic approach to winding up a company and subsequently terminates its business affairs.
What is the Liquidator’s Role?
When an insolvent company is in liquidation, the liquidator has a duty to all the company’s creditors. This includes collecting all the company’s assets and reporting to the creditors about the company’s affairs, as well as inquiring into the failure of the company and distributing the proceeds of realisation after payments of the liquidation have been resolved.
Outstanding Employee Entitlements?
In the case where the liquidation of a company terminates the employment of employees, they reserve the right to be paid their outstanding entitlements prior to unsecured creditors if there are funds left over after the payment of the expenses of the liquidator.
How should a creditor claim money back from the liquidator?
There is no certainty that creditors will be able to get their money back from the liquidator, as this is dependent upon the company’s financial situation and there is a specific order of payment which a liquidator must follow. Even if your proof of debt is accepted by the liquidator, you might not be entitled to a full payment depending where your claim sits in the established priorities.
Commercial Law at Austin Haworth & Lexon Legal (AHL Legal)
Austin Haworth & Lexon Legal (AHL Legal) is a firm that has achieved a lot of leading precedents and has experience assisting clients with corporate matters throughout all jurisdictions. Corporate law is amongst the most established areas of legal service provided by Austin Haworth & Lexon Legal (AHL Legal), as we specialise in litigation with respect to liquidation and insolvent company debt recoveries. In addition, Austin Haworth & Lexon Legal (AHL Legal) also specialises in corporate law, commercial disputes, family law and migration law. Our lawyers are more than happy to provide personalised legal advice based on our clients’ best interests. Please contact our office should you require any legal assistance.
