Winding-up a Solvent Company
The members of a solvent company may decide to wind-up the company under s491 of the Corporations Act 2001 (the Corporations Act).
Directors’ declaration of solvency
To commence a members’ voluntary winding-up, the majority of the directors must make a written declaration that they have made an inquiry into the affairs of the company and that at a meeting of directors they have formed the opinion that the company will be able to pay its debts in full within 12 months after the commencement of the winding-up. This is often referred to as a solvency declaration.
If a director makes a declaration of solvency, and it is later found that he or she did not have reasonable grounds for making the declaration, then they may face a penalty of a $5,500 fine or one year in jail, or both under s494 of the Corporations Act.
Special resolution of members
After the solvency declaration the members of the company must make a special resolution to wind up the company. All members must be given at least 21 days notice in writing of the special resolution and at the meeting at least 75% of the votes cast by members entitled to vote on a special resolution must be in favour of the resolution for it to be passed.
Notice of the resolution must be published in the Commonwealth of Australia Business Gazette (Business Gazette) within 21 days after the date of the resolution being passed. See www.asic.gov.au/gazettes for details of lodging a notice.
Where the company has been under no other form of external administration, the winding-up commences from the time the special resolution is passed.
Liquidating the company
The advantage of a members’ voluntary winding-up is that the members can choose the liquidator to take control of the affairs of the company, fix the remuneration of the liquidator, and in general terms, supervise their conduct.
In the case of a proprietary company, a person who is not a registered company liquidator can carry out the liquidation.
What do you need to lodge?
In a members’ voluntary winding-up, the following forms must be lodged with ASIC:
Click here to see the forms and read the rest of the article