While a liquidator is appointed the company may continue to trade but only under the control of the liquidator. A liquidator assumes the directors role and takes control of all assets and financial affairs as well as any business which is conducted. A company will only continue to trade during this period if a liquidator deems the conduct to be in the best interest of the creditors, but there is an obligation to cease doing so as quickly as possible. The company will cease to exist once the liquidator has completed the winding up process and has applied to ASIC to deregister the company.
A director is expected to co-operate with a liquidator throughout winding up or statutory sanctions may be imposed. Unlike in a creditor’s liquidator the company is solvent and therefore there is no need to initiate recovery proceedings. It is the job of the liquidator to verify what assets are available and ensure a proper distribution of surplus assets between members. In compliance with the voluntary winding up process preserving members interest, the distribution is paid to members in the most tax advantageous way.
How long does the winding up process last?
The process lasts as long as necessary as varies depending on the circumstances of the company, and before the liquidation can be finalised the clearance from the ATO is required.
It is the role of the liquidator to pay dividends in accordance with the prescribed priorities. These priorities are; the costs associated with the liquidation, employee entitlements, non-priority creditors, and then members. Under these priorities all creditors should see full payment in the first 12 months.
How does the winding up process end?
Before the process ends all creditors’ claims need to be satisfied, all issues need to be resolved and members must have received their distribution. The liquidator will then call a final members meeting, three months after which the company will be automaticcaly deregistered by ASIC.