Sometimes there is no realistic prospect of rescuing a company and ensuring its subsequent survival. Liquidation provides for formal cessation of trading, sale of assets and distribution of proceeds to creditors.
There are two types of insolvent liquidation, Official Liquidation, where the Court appoints a Liquidator, and Creditors’ Voluntary Liquidation, where a resolution for voluntary liquidation is passed by shareholders of the company.
In most circumstances placing the company into Creditors’ Voluntary Liquidation can be done within a short period of time.
If an insolvent company is placed into liquidation, those associated with the company may benefit in one or more of the following ways:
- A director may avoid personal liability under a Director Penalty Notice issued by the ATO.
- The company directors’ liability for insolvent trading may be limited or reduced.
- The company directors’ liability for certain offences under the Corporations Act 2001 may be limited or reduced.
- An independent person is appointed to the company who will conduct an orderly winding up of the company’s affairs.
