Corporate insolvency


29 Nov 2023

The first three months of the liquidation process


5 min


What directors can expect when their company is wound up.

The process to place a company into liquidation and a liquidator appointed is relatively straightforward. That process can be initiated by:

  • A creditor who is owed money. The creditor issues a formal demand, and if still unpaid, then engages a solicitor to apply to a court to appoint a liquidator. This process is called a court liquidation.

  • The directors and shareholders. The directors must resolve that the company is insolvent, and call a meeting of shareholders to consider appointing a liquidator and vote (either in-person or virtually) to place the company into liquidation. This process is called a creditors’ voluntary liquidation.

  • Creditors who are party to a voluntary administration. At the second meeting of creditors, they decide on the company’s future by considering whether to accept a Deed of Company Arrangement (if proposed), hand the control of company affairs back to the directors, or vote for the company to be wound up and appoint a liquidator.

The timing around these types of insolvency appointments vary due to the company’s composition. Click here to read more.

This article looks at the typical stages a liquidator goes through in a liquidation from a practical perspective. Naturally, this is subject to variables such as the complexity of the company’s operations, trading status, assets to be realised, creditor claims and their interests.

Month one

In the first month of an appointment, a liquidator will:

  1. Notify stakeholders (creditors, government agencies, service providers, directors, and employees).

  2. Locate, value, quantify, and realise any company assets. This includes conducting searches for properties or bank accounts, collecting physical assets like motor vehicles and plant and equipment. We review financial statements and if a director’s loan account appears as an asset owed to the company, directors should expect to receive a demand from a liquidator to repay that loan. The recovery of this loan would usually factor in the director’s capacity to repay it and commercial practicalities.

  3. Obtain information. Directors are obligated to assist a liquidator and submit a report on the company activities and property (ROCAP form)[1], which is lodged with the Australian Securities and Investments Commission (ASIC). Directors are asked to complete a further questionnaire to assist the liquidator, deliver books and records, and answer any questions the liquidator may have (and may involve attending an interview).

Month two

In the second month, the insolvency status is investigated to identify any insolvent trading information for creditors and any subsequent claim that may be required. And the payments/transactions made in a specific period leading up to the liquidation appointment are also investigated. A liquidator may have more questions for the directors around transactions the company entered into and where company funds have been paid.

Directors can expect questions about their personal financial positions and potentially demands for the potential claims identified.

Month three

In the third month, reporting to creditors as prescribed by the Corporations Act 2001 is completed. This is called the statutory or three-month report. Those reports set out what happened to the business of a company, information on the company assets, investigations conducted, and any potential recoveries that could be made.

Those reports also outline the liquidator’s assessment of whether any dividends will be paid to creditors.


No two liquidations are the same. Liquidations are subject to many variables including the amounts of funding/resources available in the liquidation, the extent of the company’s creditors and their appetite for providing funding to a liquidator. Creditors can fund a liquidator to conduct further investigations if they believe those investigations may lead to possible recoveries to deliver or increase a dividend to creditors.

The position of a liquidation can also change over time. Sometimes minimal information is provided when the liquidation starts and assets are located later. This changes the funding position and possible actions available to the liquidator for the benefit of creditors.

As always, we highly recommend directors seek advice early. The Worrells principals are available for no-obligation, confidential discussions about a client’s financial position and the available options.


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