Liquidation – What Happen’s Now?
A Company liquidation has a number of implications on different parties. Once a liquidator is appointed, the Liquidator has total control of the company and the directors cease to hold any powers, although they are required to remain in office.
Commencement of Liquidation by Company
Call a creditors meeting (this may not be required if the company is hopelessly insolvent) Investigate the activities of the directors and affairs of the company Take charge of the company's assets Realise the assets of the company for the market value Distribute the assets according to the legislation Report any criminal activity Report on progress to the creditors and shareholders
Restrictions on Companies Appointing Their Own Liquidator
A company loses the right to appoint their own liquidator once a company has been served with winding up proceedings (effective 1 Sept 2020).
For shareholders needing or wishing to appoint liquidators we encourage them to start the process as soon they are concerned about insolvency, and at the latest following an unsatisfied statutory demand.
What Happens to Creditors
They can exercise this right regardless of the fact that the company is in liquidation. However, it is important that the secured creditor has registered their security on the PPSR register. If they have not done, so their security ranks below those of other secured creditors or preferential creditors.
However, sometimes a creditor will have a claim against all of the company's assets. This is generally called a General Security Agreement, or GSA, and can mean that once their claim is satisfied there will be nothing for other claimants. It is not uncommon for a bank or finance company to have such a security.
The Liquidators Expenses
The staff wages, earned in the last four months, and all holiday pay (up to a maximum of $25,480) per employee. It should be noted that this section excludes company directors or their relatives.
The liquidator has to complete a first report within five days of appointment. This is a very short period for the liquidator to gather all the financial information required to prepare an estimated statement of affairs. Often the financial records of a company that is struggling is in a less than ideal state making this process more difficult than it could be.
This first report is sent to all shareholders and creditors both secured and unsecured.
A liquidator then must report on the progress of the liquidation every six months until the liquidation is completed at which time a final report will be submitted.