Winding up a solvent company
Why deregister?
A company remains registered as a company even after it ceases trading. While registered it is still subject to the legal requirements of a registered company, including payment of the annual review fee each year.
If you have no further use for your company and it is not in financial difficulty or insolvent, you may wish to close it down, that is deregister it.
A company ceases to exist on deregistration.
How can I deregister a company?
Generally, there are two ways you can deregister a company:
- through a members’ voluntary winding-up. This is a procedure for solvent companies initiated by the company’s members and involves the orderly winding-up of the company’s affairs, the appointment of a liquidator to manage the process of realising the company’s assets, ceasing or sale of its operations, payment of its debts (if any) and distribution of surplus assets (if any) among its members.
- by applying to us to voluntarily deregister a company assuming it meets certain legal requirements. See INFO 25 Voluntarily deregistering a company for more information.
You should seek your own independent professional advice to determine which option is appropriate for your company.
Winding-up a solvent company
The members of a solvent company may decide to wind-up the company under s491 of the Corporations Act 2001 (the Corporations Act).
Directors’ declaration of solvency
To commence a members’ voluntary winding-up, the majority of the directors must make a written declaration that they have made an inquiry into the affairs of the company and that at a meeting of directors they have formed the opinion that the company will be able to pay its debts in full within 12 months after the commencement of the winding-up. This is often referred to as a solvency declaration.
If a director makes a declaration of solvency, and it is later found that he or she did not have reasonable grounds for making the declaration, then they may face a penalty of a $5,500 fine or one year in jail, or both under s494 of the Corporations Act.
Special resolution of members
After the solvency declaration the members of the company must make a special resolution to wind up the company. All members must be given at least 21 days notice in writing of the special resolution and at the meeting at least 75% of the votes cast by members entitled to vote on a special resolution must be in favour of the resolution for it to be passed.
Notice of the resolution must be published in the Commonwealth of Australia Business Gazette (Business Gazette) within 21 days after the date of the resolution being passed. See www.asic.gov.au/gazettes for details of lodging a notice.
Where the company has been under no other form of external administration, the winding-up commences from the time the special resolution is passed.
Liquidating the company
The advantage of a members’ voluntary winding-up is that the members can choose the liquidator to take control of the affairs of the company, fix the remuneration of the liquidator, and in general terms, supervise their conduct.
In the case of a proprietary company, a person who is not a registered company liquidator can carry out the liquidation.
What do you need to lodge?
In a members’ voluntary winding-up, the following forms must be lodged with ASIC:
| Form | When to lodge it |
| Form 520 Declaration of solvency | Must be lodged before the date on which notices of the meeting at which the special resolution for the winding-up of the company is to be proposed are sent out. The resolution must be passed within 5 weeks after the date of making the declaration of solvency. |
| Form 205 Notification of resolution | Must be lodged within 7 days after passing the resolution and must contain or annex a printed copy of the resolution. |
| Form 505 Notification of appointment or cessation of an external administrator | Must be lodged within 14 days after appointment. The same form is used to tell us when a liquidator has ceased. |
| Form 524 Presentation of accounts and statements | Must be lodged within one month after the first 6-month period from the date of appointment of the liquidator and every 6 months after that. |
| Form 523 Notification of final meeting convened by liquidator | The liquidator must lodge the form, together with a copy of the account showing how the winding-up was conducted, within 7 days after the final meeting. The meeting must be advertised in the Commonwealth of Australia Business Gazette at least one month before it is to be held. See www.asic.gov.au/gazettes for details of lodging a notice.The company is deregistered three months after the date on which the Form 523 is lodged. |
Court involvement
During the course of a members’ voluntary winding-up, a creditor or a member may ask a court to determine any question arising in the winding-up, review the liquidator’s remuneration or exercise any power that a court possesses in a compulsory winding-up, such as choosing a liquidator.
The leave of a court must be obtained before a company can be voluntarily wound up if an application for the company to be wound up as insolvent has been filed in a court, or if a court has already ordered that the company be wound up.
If at any time during a members’ voluntary winding-up the liquidator forms the opinion that the company will be unable to pay its debts in full, then the liquidator must either apply to the court for the company to be wound up in insolvency, appoint an administrator or convene a meeting of creditors.
| This is Information Sheet 78 (INFO 78). Information sheets provide concise guidance on a specific process or compliance issue or an overview of detailed guidance. |
ASIC Website: Printed 11/23/2008
