Introduction

In most cases, the precondition for the appointment of a liquidator and the winding up of a company by a court is that a company is insolvent. However, in some cases courts will make these orders in the context of a shareholders dispute where there is a management deadlock or a breakdown in trust and confidence between shareholders. Additionally, a court may make these orders where there has been serious fraud or mismanagement in the conduct of a company’s affairs.

Relevant law

The Productivity Commission published its final report on Business Set-up, Transfer and Closure on 7 December 2015. A copy of the final report is available here.

The final report recommends a number of changes to Australia's corporate insolvency laws and follows public consultation on the Productivity Commission's draft report released in May 2015.

Where a court has ordered the winding-up of a company, a shareholder may be able to have the winding up terminated under section 482 of the Corporations Act 2001.

Relevant factors

The power of the court to terminate a winding-up is discretionary. Relevant factors to be considered, which are not exhaustive, include the following:

Federal Court confirms the ATO cannot issue garnishee notices to a company being wound up to collect post-liquidation tax liabilities.

This week’s TGIF considers a decision in which the court appointed an additional liquidator to conduct further investigations alongside the incumbent liquidators in a creditors’ voluntary winding up.

WHAT HAPPENED?

On 18 July 2014, liquidators were appointed to Ambient Advertising Pty Ltd (Ambient) pursuant to the resolution of creditors under section 439C(c) of the Corporations Act 2001 (Cth).

If a director can exercise a right of set-off against a company in liquidation for a debt owed to the director or for a liability of the company to the director (which may be unascertained in amount or contingent), it may help to cancel out or significantly reduce the director’s liability to the company for insolvent trading.

We have heard it many times: “the only people who win when a company goes into liquidation are the lawyers and the accountants”. 

Whether that is true or not, certainly it is the case that having a corporate customer go into liquidation can cause significant damage to your cash flow, your morale and ultimately your business.

YOU MIGHT NEED TO REPAY MONEY TO YOUR DEFUNCT CUSTOMER’S LIQUIDATOR

Introduction

On 1 July 2015, the Commonwealth Government launched the Fair Entitlements Guarantee Recovery Programme for an initial period of two years. The purpose of the Recovery Programme is to increase the prospects of the Commonwealth recovering amounts it has paid to former employees of companies in liquidation pursuant to the Fair Entitlements Guarantee Scheme[1]. 

It is a well understood legal requirement that any time security is granted, it needs to be registered. Failure to register collateral granted as security according to the requirements of the Personal Property Securities Act 2009 (Cth) can result in the property vesting in the company in administration or liquidation. However in certain circumstances the court may make an order extending the time for registration, even after an insolvency event in respect of the grantor.

When a company is facing short term financial difficulties the directors or shareholders may decide to make a loan to the company to pay wages.