What is an official liquidation?

An official liquidation occurs when a creditor who is owed more than $2,000 applies to the court to have a liquidator (an independent and suitably qualified person) appointed to an insolvent company.

An official liquidation may also be initiated when a court appoints an official liquidator to wind up a company as a result of an application by:

  • the company
  • a director of the company
  • a member (shareholder) of the company
  • a provisional or voluntary liquidator
  • the Australian Securities and Investments Commission.

What are the circumstances in which the court can make an order for a company to be wound up?

The court can make an order for a company to be wound up in the following circumstances:

  • where the company is proved to be insolvent
  • if the directors have acted in their own interests, rather than in the interests of the shareholders of the company
  • where the court is of the opinion that the interests of the public, shareholders or creditors are best served by that course of action
  • where the court is of the opinion that it is just and equitable that the company be wound up.

What is the purpose of appointing a liquidator?

A liquidator is appointed to take control of an insolvent company in order to:

  • investigate its affairs
  • determine whether any assets or funds may be available, or recoverable, to pay creditors
  • wind up the company in an orderly and fair way for the benefit of creditors.

What is the liquidator’s main role?

The liquidator’s main role is to take control of and realize the company’s assets so that surplus funds can be distributed to creditors.

If there are surplus funds after the creditors have been paid, they can be distributed to the members, in accordance with the company’s constitution.

The liquidator may continue the business of the company, to enable the beneficial disposal or winding up of the business.

Are you or your company facing an uncertain financial future? David Clout leads a team of highly regarded experts in insolvency. They are experienced negotiators and strategic thinkers. David is a registered Liquidator and Bankruptcy Trustee, he is qualified to accept a range of insolvency appointments. Call +61 7 3129 3316 to arrange a consultation.