If your company is being liquidated, it can be a frightening process. You will see a company you value quickly dissolve, you won’t get to see your co-workers anymore, and you will have lost your income.
They're harsh enough consequences for you, but unfortunately, it can get worse. When you lose your income, you can find yourself in dangerous financial situations that can easily get out of control and see you sink deep into debt.
If you find yourself in a company that is about to be liquidated or has been liquidated, we recognise it can place a high amount of stress and frustration on you. We have worked with many Australians in that situation. While we couldn’t resolve all of their problems, we did manage to stabilise their financial position so they could continue building a strong future for themselves.
As we helped them, we hope we can provide you with assistance as well. This article takes a look at the liquidation process and what happens to employees. Hopefully, this will provide you with a greater perspective and demonstrate that there is some light at the end of the tunnel.
What is the Liquidation of a Company?
A liquidation of a company is the systematic closing of a company that deals with its stakeholders. It involves assessing the company's assets, selling the business operations, distributing the remaining money to the creditors and distributing any surplus of remaining funds to the shareholders.
A company can be voluntarily liquidated due to a members’ or creditors’ voluntary liquidation. Liquidations can also occur as a result of a court order. A court liquidation occurs when the company is forced to liquidate, usually as a result of a creditor following court proceedings.
What is the Liquidation Process?
Voluntary liquidation can be difficult for many companies, which means the steps to liquidate may appear counter-intuitive. However, these steps are required to meet Australian regulations. There are five main steps when a company is liquidating itself:
Step 1: Company Directors Must Make a Declaration of Solvency
The majority of directors must declare they are able to pay all their existing debts within the next 12 months.
Step 2: Company Members Must Pass a Special Resolution
The company members must lodge a Notice of Resolution.
Step 3: Notice of the Special Resolution Must Be Passed on the Published Notices Website
The company has 21 days to publish the special resolution notice on ASIC’s website.
Step 4: Liquidator Winds Up Company's Affairs
The liquidator is responsible for selling the company’s assets and distributing them amongst creditors and shareholders.
Step 5: Liquidator Finishes Winding Up Company and Lodges Final Documents
Once the liquidator has finished their liquidation process, they are required to lodge the Notification Of Final Meeting Convened By Liquidators to complete the process.
What Happens to Employees of a Liquidated Organisation?
The Fair Entitlements Guarantee applies to employees of a liquidated company, helping them get their unpaid entitlements which can include:
- Wages – up to 13 weeks of unpaid wages (capped at the FEG maximum weekly wage)
- Annual leave
- Long service leave
- Payment in lieu of notice of termination – maximum of 5 weeks
- Redundancy pay – up to 4 weeks per full year of service
Protect Yourself From Debt
If your company has been liquidated, this may leave you in a tricky situation financially. You can seek the advice of Revive Financial to ensure you do not sink into a debt spiral.
Find out more now through our contact form. 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 for professional, and non-judgemental advice.