Are you a business owner looking to wind up your company’s operations? This is an important step of the business life cycle, and can come about because you have sold your business, you want to retire from your business or you are unable to physically or financially continue running the business.
The Australian Investments & Securities Commission (ASIC) sets out a simple process to cease a company, called voluntary deregistration. Voluntary deregistration is a process available after a company satisfies certain criteria, which includes having company assets with a total value of less than $1000. If your company does not meet these tests and is solvent, you can instead choose to dissolve the company through a process known as winding up.
What Does Winding Up a Company Mean?
Winding up is a process whereby:
- Outstanding company matters are finalised;
- A company’s assets are liquidated; and
- It ceases to exist as a company.
We set out these steps below.
How Do I Wind Up My Company?
- Step 1: Company directors must make a declaration of solvency
- Step 2: Company members must pass a special resolution
- Step 3: Notice of the special resolution must be passed on the Published notices website
- Step 4: Liquidator winds up company’s affairs
- Step 5: Liquidator finishes winding up company and lodges final documents
Declaration of Solvency
A majority of the directors (e.g. the sole director, 2 of the 3 directors or 3 of the 5 directors) must make a Declaration of Solvency (ASIC Form 520). The directors must declare that they believe the company will be able to pay all of its existing debts within 12 months of the start of the winding up process.
If the directors believe that a company is insolvent, meaning it cannot pay its debts when they fall due, then there is a different process, called winding up an insolvent company.
Special Resolution of Directors
You need to provide the shareholders at least 21 days notice in writing of the meeting in which they will pass a vote on the special resolution. At the meeting, at least 75% of company members (shareholders) must vote in favour of the resolution for it to pass. The winding-up begins from the date the shareholders pass the special resolution.
The company must lodge a Notification of appointment or cessation of an external administrator (ASIC Form 505) and inform ASIC that you have appointed a liquidator. The company must lodge the Declaration of Solvency (ASIC Form 520) before you lodge the Form 205 and Form 505.
Published Notices Website
Once the resolution is passed, notice of the resolution must be published on ASIC’s Published Notices, within 21 days. You need to sign up to the website and pay the relevant fee to publish the notice.
Liquidator Winds Up Company’s Affairs
The liquidator can then begin to wind up the company. The liquidator needs to lodge a Presentation of Accounts and Statements (ASIC Form 524) every six months after the liquidator has been appointed. This form needs to be lodged while the winding up process is underway.
If the liquidator thinks that the company will be unable to pay their debts in full, the liquidator must either convene a meeting of creditors or apply to the court for the company to be wound up in insolvency.
Liquidator Lodges Final Documents
Once the liquidator has finished winding up the company, the liquidator need to lodge a Notification of Final Meeting convened by Liquidators (ASIC Form 523). This must be lodged within seven days of the company’s final meeting and must include an account of how the winding up was conducted.
The liquidator needs to also lodge:
- Presentation of Accounts and Statements (ASIC Form 524)
- A copy of Minutes of Meeting (ASIC Form 5011).
The company will be deregistered three months after the Form 523 has been lodged.
If you want to close your company and it is solvent, but does not meet the tests to be able to voluntarily deregister the company, then you can consider a winding up. LegalVision’s lawyers can assist with the orderly closing down of your business, including selling or otherwise transferring assets, including intellectual property, as required. Questions? Get in touch on 1300 544 755.