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Facts about closing a company

Winding up a solvent company

A company may go through a process of being closed up or “winding up” if it does not meet requirements set by the ASIC for voluntary de-registration (a company that has assets valued at more than $1,000 cannot be de-registered). Winding up is a term that describes the process where a company’s assets are liquidated, outstanding matters are finalised, and the company ceases to exist.

Steps to Wind Up a Company

Step 1: Declaration of Solvency

In order to begin the process of winding up the company, the directors are required to make a declaration of solvency by filling up Form 520. This essentially means the directors are certain the company will clear up all existing debts within a year of the commencement of the winding up process.

Step 2: Special Resolution

The second step involves a special resolution that must be made by the company members to wind up the company. The members must be given a minimum of 21 days notice to meet and vote on the special resolution – though in some cases this time-frame can be reduced by agreement. Following the vote, at least 75% of the members must be in favor of passing the resolution and once this happens, the company must then appoint a liquidator for the winding up to officially commence.

Step 3: A Notice of the Special Resolution Must be Published

An official notice of the company’s resolution to wind up must be published on ASIC’s website on the first business day after a liquidator has been appointed. An account must be created on the website in order to post the announcement – and announcement fees may apply.

Step 4: Liquidating the Company

The liquidator is required to lodge with the ASIC legal receipts and any payments made towards form 5602 (Administration Return). If for any reason the liquidator thinks the company may not be able to pay all their debts, they have three options. They can choose to:

a) Convene a meeting with the creditors

b) Apply to the court to have the company wound up in insolvency

c) Appoint a voluntary administrator

Step 5: Lodging Final Documents

Companies that have been wound up after July 2018 don’t need to lodge form 523 but the liquidator is required to lodge form 5603, formally known as the “end of administration return”. Once form 5603 has been officially lodged by the liquidator, the company will be de-registered after three months.

For more information:

https://insolvencynotices.asic.gov.au/

https://asic.gov.au/regulatory-resources/forms/forms-folder/524-presentation-of-accounts-and-statement/

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