What is liquidation?
A liquidation can occur voluntarily (by a decision of the directors and shareholders) or through a court order. Voluntary liquidation occurs when the business owners determine that the company can no longer satisfy its debts and is insolvent, or likely to become insolvent. It allows for an orderly realisation of the company’s assets, investigations into the company’s failure, and distribution of the company’s assets among its creditors.
What is voluntary administration?
Voluntary administration allows businesses to address insolvency issues, and if possible, return it to healthy trading position. This is usually available to directors who are proactive when they see their company is in financial trouble. The voluntary administration process ensures that the business, the company’s assets and affairs are administered in a way that (among other things) maximises the chances of a business continuing to exist by a voluntary administrator taking control as if they are the company directors. The administration process takes place over an interim period, usually lasting between 20 and 30 business days.
Can I apply for liquidation voluntarily?
Yes, if you are trading through a company and are the director and shareholder. Call us today to discuss the process.
What if I’m a sole trader?
Liquidation and voluntary administration are for businesses trading through a company structure (incorporated companies and trust structures). If you are trading as a sole trader and have financial issues in the business, then your debts can be dealt with through bankruptcy or other debt solutions mechanism. Go to our or bankruptcy page to learn more.
What happens to my employees if my business is wound up?
Employee entitlements (including wages, superannuation, leave, and termination amounts, etc.) are treated as a priority dividend—as a priority creditor in the insolvency appointment—under the Corporations Act 2001 and Bankruptcy Act 1966 ahead of other types of creditor claims.
The federal government has a scheme to protect some employee entitlements in the event of a company being placed into liquidation—known as the Fair Entitlements Guarantee scheme (FEG). This scheme’s funding assists to satisfy and pay outstanding wages, leave entitlements, and termination amounts (subject to some limits) that employees are owed when the business cannot afford to pay these debts. Call us to find out more.
Can I still trade my business if I am solvent?
Directors must be aware of “insolvent trading” laws that can have substantial penalties or implications. If your business is insolvent, it is best to touch base with Worrells to discuss what can be done legally to save your business and to understand what your rights and obligations are.