Appointing a Liquidator

A Liquidator is appointed to a company generally by its director’s to wind up the Company’s affairs. A Liquidator is appointed to a company who is insolvent, i.e. there are insufficient assets to pay all of the company’s liabilities.

Once appointed, a Liquidator will take control of the company’s affairs, including its property and will realise the company’s assets to distribute the proceeds of realisation among its creditors, with any surplus being returned to the shareholders.

A company’s business can survive as it may be able to be advertised for sale and sold, so that the business can continue to serve its customers and employees retained. The company can then be wound up – not the business.

Appointing a Liquidator is a difficult decision to make for some director’s as it means that your company has failed. This may or may not be as a result of any wrongdoing by the director’s. Control of the company is removed from the director and is placed with the Liquidator, they deal with your creditors and any actions being taken against the company are stayed, i.e. they are not able to be commenced or continue. Creditors who are only owed by the company are only able to lodge a claim for their debt with the Liquidator, they can no longer sue the company. This can reduce the stress being felt by the director’s as a result of creditors pressing for payment.

At the commencement of the Liquidation, the Liquidator will convene a meeting of the creditors of the company to primarily discuss the affairs of the company and the reasons for the company’s failure. The creditors will also approve the costs of the Liquidation, which are primarily paid from the assets of the company. Creditors can then contact the Liquidator for details regarding the company.

During the course of the appointment, the Liquidator will request the books and records of the company from the director’s and will want to discuss the affairs of the company. A Liquidator must review the records and conduct investigations into the company’s property, business and affairs. It is much easier and less costly for the Liquidator if the director’s co-operate during this process. At the conclusion of these investigations a report is prepared and submitted to the Australian Securities & Investments Commission (“ASIC”) detailing the results of the investigations. Creditors are informed regarding the results of the investigations too. Once all matters are dealt with, the company’s affairs can be finalised and the company de-registered.

A company has generally been struggling for some time before the decision to seek advice and appointing a Liquidator occurs. However, as is often the case, waiting for a problem to resolve itself without doing anything to change it rarely works out. Proactive steps must be taken to deal with the issue. It is important to seek help early, as this increases the chance of your business and/or your company continuing.