A Members’ Voluntary Windings Up is the process for dismantling a solvent company. We have written about these in the past, particularly on the technical process. As the end of the tax year approached we saw an increase, albeit quite expected, in enquiries from directors who want to wind up their corporation’s affairs.
I say ‘quite expected increase’ because April, May and June are typically the time when these enquiries and the resulting appointments increase. Directors and their advisors may perceive a tax advantage in winding up the solvent company before 30 June, or they just may wish to start the new year with a clean slate.
After being asked – ‘how much will it cost’ the next two questions that follow are:
1. How quickly can you be appointed?-
2. Can you finalise the winding up before 30 June?
The answer to the first question is easy. We can be appointed as quickly as the directors and members can sign the appropriate resolutions (formal meetings are not necessary under the relevant provisions of the Corporations Act). Sometimes, with a company structure of two or less directors and members, that is quite easy. Sometimes, if there is a dispute between parties or some happen to reside overseas, that may take some time. But essentially the appointment process is easy.
Given that most members’ voluntary windings up have no outstanding creditors and no assets but rather cash and loans to be distributed ‘in specie’, the actual process in the winding up can be done quickly and easily.
The major and fundamental factor that a liquidator needs in a members’ voluntary winding up is tax clearance. Without it they will not be able to make a final distribution (or any distribution) and will not be able to call a final meeting and have the company deregistered. The time line of the liquidation will be fairly dependant on how long it takes to get tax clearance.
In a perfect world with every tax form properly lodged beforehand, the Australian Taxation Office may process the request for tax clearance quickly. But we rarely get a perfect world. Many times there are tax forms that remain outstanding at the time of the appointment, including a final tax return for the period ending on the date of the appointment. The preparation and lodgment of these forms may be the main cause for the delay in finalising the liquidation.
We also suggest that all – and we mean all – BAS, PAYG and income tax returns are filed, even if they are nil returns, as at the time of the appointment along with payment of any outstanding tax. Otherwise directors thinking that we may be able to wrap up the liquidation before a 30 June deadline may be disappointed.