Liquidation is a formal way to wind up a registered company, usually due to having long-term financial difficulties. The Liquidation process involves selling all of your company’s assets, paying the funds received to your creditors and dissolving the business. Although Liquidation is seen as a final option for shutting down your business, this step can come as a relief if you’ve been struggling with your company’s finances for some time. Unfortunately, myths on liquidation still exist and persist to scare directors from taking the next step towards initiating the Liquidation process.
If you’re considering Liquidation as an option for your company, it’s important to debunk these common myths so you can make an informed decision about what to do next.
No. Liquidations must be carried out by a registered liquidator, not the company director themselves. The appointed Liquidator is the only person who can direct the Liquidation process. As a director, your role during the Liquidation process is to cooperate with the Liquidator. This means supplying the Liquidator with all necessary paperwork, documentation and a written report on your company’s business, property and finances. As defined by the Australian Securities and Investments Commission (ASIC), a director’s duties during Liquidation include:
The Liquidator will look closely at a director’s conduct of their company to see if there have been any inappropriate dealings, or if the directors knew the company was in trouble but continued to trade while insolvent. However, under new safe harbour laws, directors are protected from insolvent trading penalties if they implemented a genuine plan to turnaround or restructure their company.
Revive Financial are Registered Liquidators and can provide you with any help you need to begin the Liquidation process, or simply discuss your company’s financial situation to see if Liquidation is the right option for you. Get in touch with us today.
No. It’s common for directors to believe Liquidating their company will affect their own personal finances, but having your company go into liquidation doesn’t mean you will enter bankruptcy yourself. Your company is a separate legal entity, which means your personal finances are separate from your company’s finances. As defined by the Australian Government, your company has the same rights as a natural person and can incur debt, sue and be sued. As a director, you can limit your personal liability and are generally not liable for your company’s debts. There are, however, some exceptions. The four main areas of personal liability for directors are:
Further information on these, and other, director liability risks is available here.
Of serious concern is that under new laws, company directors could face jail time or hefty fines for not paying their employees’ superannuation. This makes superannuation the first bill that should be paid, not the last.
Yes. Company Liquidation may affect your ability to obtain credit, but banks may still lend in these circumstances. Alternatively, there are many non-bank lenders who specialise in lending for directors who have been refused loans as a result of a related company liquidation. We can help with funding for businesses and directors. For directors who are looking for a home loan or help managing personal debts, we provide specialised solutions. For businesses looking for a business loan to avoid liquidation, we can assist with loans for cashflow, tax debts and other business finance. Providing fast business loans to help consolidate your company debt. Get in touch with us today for a free consultation on 1800 861 247.
Yes. If you’re a director of a company that goes into Liquidation, you’re not automatically banned from being a director of another company. You’re allowed to hold your directorships, or be appointed as a director, even if one or more companies enter Liquidation. There are, however, three exceptions to this rule:
No. Except for unpaid superannuation guarantee charge, the Australian Taxation Office (ATO) rank alongside other unsecured creditors for payment in liquidation. The order is as follows:
No. Once the Liquidation process has started on your company, your creditors are not allowed permitted to pursue payment or continue legal action against the company. The appointed Liquidator will be responsible for dealing with any creditor enquiries. They are required to issue a report to your company’s creditors as soon as possible, notifying creditors of their appointment and details. Creditors are not allowed to recover their debts directly from you, unless they have a personal guarantee.
We understand one of the biggest challenges for directors of insolvent companies is dealing with creditors. Appointing a Liquidator has the enormous benefit of removing the stress and uncertainty of knowing what to say to creditors and working out who to pay. Doing the wrong thing, such as preferring particular creditors over others could be a breach of your director’s duties. A Liquidator will deal with your company’s affairs legally and fairly to return any money available to creditors.
Yes. Speaking to a Liquidator will help you understand whether your company may be insolvent, the options available to it and the risks for you as a director of an insolvent company. You know you're getting the right insolvency advice from a Liquidator because they're qualified professionals. That said, as with any profession, there may be differing opinions. At Revive Financial, we cover with you the full range of options available for your business from loans and finance to turnaround and restructuring, Voluntary Administration and Liquidation. While we understand these options, our specialisation is insolvency, so we work with expert professionals to deliver the right outcome for your business.
Liquidation can put a stop to any worries you have regarding business insolvency and debt. For some companies, it is the right, or only available option. However, if you have a viable business, or wish to avoid Liquidation, there are other options you can look at before considering Liquidation.
If you’re trying to decide if Liquidation is the best option for you, consult business debt professionals to help you make an informed decision about your company’s future. Revive Financial are business debt experts who can help assess your company’s financial situation and suggest the best solution for you moving forward. Complete our Instant Online Assessment or contact us today on 1800 861 247 to find out if you should Liquidate your company.
For more information on Company Liquidation, check out our Company Liquidation page here.