When a company stops trading, it is up to the director to deal with it correctly. Otherwise, it will sit dormant and accumulate fees. There are several ways to close your company. The best option depends on the current financial position of your company. For instance, is your company solvent or insolvent? Does it still have valuable assets? In this article, we run through the options, so you can make a decision whether to deregister or enter liquidation.
If you have stopped trading and simply want to close the company, you can apply to have it deregistered. To deregister your company, it must have no assets or debts. If your company fits the criteria, you can apply for voluntary deregistration of your company using ASIC Form 6010. The form can be found on the Australian Securities and Investments Commission website and requires you to make the following declaration:
There are other options for you if your company falls outside of these criteria. It’s important to find the most suitable solution as ASIC may prosecute you for making a false declaration.
Deregistering your company can save you from having to pay annual registration and administration fees for your company. Before you apply to deregister, you also need to cancel any additional licenses you needed to operate such as an Australian Financial Services Licence (AFSL) or an Australian Credit Licence (ACL).
If your company doesn’t fit the criteria for a voluntary deregistration, a members voluntary liquidation is a better way to proceed. For example, you may still have assets to distribute or potential tax benefits that can be realised.
The benefits of a members voluntary liquidation include:
The voluntary liquidation process involves:
If your company is insolvent there are some other options for you to consider.
For an insolvent company, undertaking a creditors voluntary liquidation can be the best option. However, if the company or its directors cannot afford to appoint a liquidator, it may come to an end in one of two ways.
A company does not need to be insolvent in order for ASIC to deregister it, however, this is often the case. ASIC will deregister the company if it fails to pay its Annual Return fee for 12 months or fails to reply to a compliance notice within 6 months. Further information is available here.
A creditor may file a winding-up application at court to wind up a company through court liquidation. This process begins when the creditor issues a statutory demand to the company’s registered office, or through a judgement at court.
The Australian Taxation Office may still issue a director penalty notice even if a company has been deregistered or is in liquidation.
A company can be reinstated, even if it has previously been deregistered. The options for company reinstatement include applying to ASIC or an application to the court. These methods can be time consuming and expensive.
Looking to close your company but still unsure whether to deregister or liquidate? We are happy to talk through the above options or assist with a voluntary liquidation to close your company.
Complete our Instant Online Assessment to learn about your options. If your business uses XERO for its accounting, you can receive an instant score and suggested actions based on your personal situation, using our free Business Viability Tool. Alternatively, speak to one of the team now on 1800 861 247 or via our contact form for professional, and non-judgemental advice.