30 Sep 2015

The Cost of Liquidation


2 min

Ask those in the trade!

When a company is faced with liquidation, it comes at a cost to various people and/or entities including:

  • Employees—the cost of losing their jobs and possibly the non-payment of entitlements such as superannuation.
  • Directors—it is often the cost of losing all their assets and potentially facing bankruptcy.
  • Creditors—it is the cost of not being paid their debts and having to somehow make up their loss.
  • ATO—it is a cost to all Australians through the loss of taxation revenue that funds the government’s services.

And of course, there is also the direct cost of the conduct of the liquidation process itself. However, that cost, especially for small to medium expertises, may not be as expensive as some may think.

The real cost of a liquidation, especially of a simple straightforward liquidation, can in many cases be less than $10,000.

This is in stark contrast to that recently reported in the Sydney Morning Herald, where a non-liquidator was quoted as saying, “the cost of appointing a registered administrator is much higher, starting at $25,000”.

Based on our experience, we suggest that if a director is looking at placing their company into liquidation, especially when there are a limited number of creditors (including the ATO) and assets, to contact a Worrells Partner and ask for a real cost estimate. That estimate may not be as much as you may think and in the main be much less than that reported minimum of $25,000. We know this, because we actually do the liquidations.

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