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Court Appointed Liquidations

A liquidator may be appointed to a company by the Court, as a result of an application made by one or more of the company’s creditors, a director or member of the company, the company itself, a provisional or voluntary liquidator, or the Australian Securities & Investments Commission (“ASIC”). Most commonly a liquidator is appointed to the company by the Court on the application of a creditor, as a result of the company failing to pay the creditor debts which it owes.

The purpose of appointing a Liquidator to an insolvent company is to have an independent and suitably qualified person take control of the company, investigate its affairs, determine whether any assets or funds may be available or recoverable to pay creditors and wind up the company in an orderly and fair way for the benefit of all creditors. A liquidator who is appointed to an insolvent company will:

  • Take control of the company’s assets;

  • Examine the events and circumstances preceding the winding up of the company and potentially recover company property which has been unfairly dealt with;

  • Examine the company’s financial position in the period leading up to its winding up, in order to determine whether the company traded whilst insolvent. If the company did trade whilst insolvent then the liquidator has the ability to seek to recover funds from the company’s directors (and in certain circumstances others) in order to compensate the company for the loss and damage caused to it due to insolvent trading;

  • Report to creditors regarding the results of the Liquidator’s investigations and the prospect of a dividend being paid in the liquidation; and

  • Provide for a fair and equitable distribution of the company’s property between creditors in accordance with the priorities of distribution under the Corporations Act, 2001 (Cth).

 

For more information regarding Court Liquidations you may wish to contact one of the staff and Pearce & Heers, or alternatively the ASIC has provided further information regarding corporate insolvency which can be obtained from the ASIC’s website by following the links below.