In a winding up, it is the duty of the liquidator to realise all assets of the company. This includes outstanding loans to shareholders and directors. In this article, we explain what happens to some of these loans — loans that comply with Division 7A of the Income Tax Assessment Act 1936 (Cth) — in the winding up of a company.
The primary way in which creditors can influence a voluntary administration is through participation in either the first or second creditors’ meeting — meetings chaired by the voluntary administrator. Through this process creditors can replace voluntary administrators, have a say on remuneration and costs, approve of a debt compromise and more.
Table of contents: Summary For many, if not most, company directors and owners in Australia, private practice accountants are the first port-of-call for insolvency advice. This is problematic as: We examine the evidence in support of these conclusions in this…
Voluntary liquidation (CVL) and voluntary administration (VA) have a range of pros and cons, relative to each other. Here we look at the advantages of voluntary administration, including the ability to turn around the business, director initiation and the breathing space it provides to directors. We compare this with CVL, which is generally more cost-effectiveand more streamlined than voluntary administration. It is also generally the more appropriate option where the business is unlikely to be saved through a restructure process. This overview is intended for company directors of small-to-medium sized businesses weighing up their options for external administration.
Company reorganisation or restructuring is the most common way of turning around a struggling business that is insolvent, or at risk of becoming so.
The winding up or liquidation of a company means realising the assets of the business and distributing the proceeds to unsecured creditors. The problem: some portion of the business’ total value is always lost in an insolvent liquidation. Whatever the business valuation prior to a liquidator being appointed, the final value of assets will almost certainly be lower.
Businesses can struggle or fail in different ways. Consider an unprofitable transport business that hasn’t been able to put up rates in 20 years due to stiff competition. Or, consider the same type of business, where its unprofitability is caused by the inability to pay debts entered into by prior directors.
When a business is in serious financial trouble, what is the best path ahead? This is, of course, a question for the directors of struggling businesses themselves, but it’s also a question for their lawyers, accountants and creditors.
Are you owed money by a company that is being wound up? Don’t get your hopes up until you have seen the 3 month statutory liquidator’s report. It is this report that will give a clear indication of the likelihood of a return.
The winding-up of a company is a daunting experience for a director. They know that their previous actions are under close scrutiny. But does that scrutiny include their personal assets? In short, yes. But liquidators need to tread carefully. In this article, we look into liquidators using the examination power to inquire into a director’s personal assets.
Corporate insolvency practitioners are important gatekeepers in the economy. In Australia, there is a paradox that the system is designed to try to stop the insolvency practitioner from giving meaningful pre-insolvency advice to insolvent businesses. This is a pity because insolvency practitioners are well-placed to give pre-insolvency advice.
An important task for a liquidator, once appointed, is to see whether there are any transactions of the company that are ‘voidable’, and can be clawed back for the purposes of distribution to creditors.