• Liquidation

Liquidation

What is Liquidation and What Does It Mean?

When you think of liquidation, you probably imagine people entering a company’s premises, kicking everyone out, locking the doors, and selling all the assets regardless of who they actually belong to. While some elements of this scenario may be true, the outcome largely depends on the type of liquidation and whether the director has properly prepared for the company’s liquidation or not.

Yes, there is a way to properly prepare for a company’s liquidation, and LemonAide can assist directors in navigating this process.

The Difference Between LemonAide and a Liquidator

A Company Liquidator Works for the Creditors

It’s important to understand that a ‘ liquidator’s works for the creditors, not the director, even if the director appointed the liquidator. The liquidator’s job is to get as much money as possible for the company’s creditors.

LemonAide Represents Your Interests

LemonAide is different.

As our client, we look after your interests and represent you, the director of the company, as you prepare for your company’s liquidation. We examine the company’s affairs and dealings through the lens of a liquidator, providing advice on potential claims a liquidator may make against you, your family, and the company’s creditors.

Our holistic review of your company’s circumstances sets us apart from a liquidator.

For example, if a liquidator discovers that the company has been trading while insolvent, they may pursue legal action against the director. LemonAide can help you navigate this situation by reviewing the company’s financial records and advising you on the best course of action to minimize your personal liability.

Creditors Voluntary Liquidation

A Creditors Voluntary Liquidation occurs when a company owes money to people or other companies.

The members and directors (usually the same people or related parties) appoint a liquidator to deal with the company’s insurmountable debt position.

Often, these appointments are not thoroughly considered and are initiated by:

An accountant advising the director that the company is insolvent and should immediately discuss the situation with a liquidator,

or

The Australian Taxation Office sending a letter to the director advising that they will be personally liable for elements of the company’s debt if the company does not pay the debt, enter into Voluntary Administration, appoint a Small Business Restructuring practitioner or wind up through a Creditors Voluntary Liquidation.

What is Often Overlooked in This Process?

  • No one with extensive insolvency experience is reviewing the company’s books and records to identify potential claims a liquidator could pursue.
  • No one is considering your personal asset and liability position to determine if there are alternative ways to deal with the company’s creditors.
  • No one is advising you on how the liquidation may affect you personally or whether you may be eligible to restructure the company’s business for a potential second chance without the debts.

If you don’t have someone reviewing and discussing these aspects with you, you may be setting yourself up for a costly mistake. Book an appointment today to see how we can help you make an informed decision based on your circumstances.

  • Liquidation

Court Liquidation

A Court Liquidation is initiated by a creditor who has used the court process to attempt to recover their debt. The creditor will send a creditor’s statutory demand to the registered office listed on the company register held by the Australian Securities and Investments Commission (ASIC).

A creditor’s statutory demand is a formal demand for payment of a debt owed by a company, and if the company fails to respond within 28 days, the creditor can use this as grounds to apply for a Court Liquidation.

It’s crucial to ensure that your company’s registered office details are up to date with ASIC. If the registered office is at an old accountant you haven’t used in years, you may not receive the statutory demand. However, the obligation to keep these details current lies with you, and the creditor is not required to confirm the registered office details with you before serving the demand.

Members Voluntary Liquidation

A Members Voluntary Liquidation (MVL) is a solvent liquidation used to close down a company’s operations when there is no money owed to creditors. You may wonder why you wouldn’t simply deregister the company with ASIC.

An MVL provides the director with reassurance that the company is properly deregistered and that no creditors are left unpaid. This process can help avoid future claims against the director if a creditor emerges after the company has been deregistered.

Regardless of the type of liquidation, whether it’s a Creditors Voluntary Liquidation that has gone wrong or a Court Liquidation, LemonAide can help you achieve a better outcome. Don’t hesitate to book an appointment today to discuss how we can assist you with your specific circumstances.

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We Take the Time to Explain the Liquidation Process

At LemonAide, we take the time to explain the liquidation process and what you can expect during this time. We’ll discuss how the liquidation will affect you personally as the company director and your way of life. If there are assets in the company that you would like to continue using, such as motor vehicles, websites, or phone numbers, we can help you understand your options.

We’ll provide advice on whether it’s worth attempting to have the company removed from liquidation or if it’s preferable to purchase the assets from the liquidator.

To learn more about our experience and how we can help, visit our “About Us” page and book an appointment today. We guarantee that you’ll feel better after discussing your circumstances with us, and you’ll benefit from our extensive practical experience.

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Liquidation 3

Frequently Asked Questions

A Liquidation is for companies. In Australia a company cannot go Bankrupt, that is only in the USA. An individual goes bankrupt.

We will look at whether the Company really needs to enter into Liquidation or if there are other options that could be utilised to avoid a Liquidation all together, we will always recommend these services first.

We will look at the Company’s financial situation and the Director’s personal financial situation and make recommendations on actions that should be undertaken to either improve the Company’s situation to return to a profit or to minimise the effects of Liquidation on the Director, Employees or Creditors.

If Liquidation of a Company is recommended it is not necessarily the end of business but part of a bigger strategy to restructure the Company’s business. In any event, if Liquidation has been recommended, we will discuss with you how a Liquidation will affect the Director’s personal financial circumstances.

This is dependent upon one main factor and that is the Liquidator’s investigations. If a Liquidator’s investigations reveal many potential claims that they wish to pursue against various parties, then the Liquidation could be extended beyond a year.

We have seen Liquidation’s completed within 6 months, however this a rarity and not the norm.

Refer to the blog on Voidable transactions here.

On average it will cost around $13,000 to $15,000 to place a company into liquidation where the Company is insolvent.

There are advertisements for low cost liquidation. Refer to our blog here on why there is no such thing as a low cost liquidation.

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