Facing financial difficulties when it comes to your business can be a very traumatic time, especially if you are the one carrying the burden. If the company’s creditors are putting you under pressure, and you are constantly worrying about your personal liability to the company’s debts, you should consider liquidating the company.
Liquidation is a formal way to wind up a registered company in an orderly manner, so that its assets can be distributed fairly to creditors where required. The company is brought to an end, trading stops and the business ceases to exist.
The purpose of liquidating an insolvent company is to have an independent, qualified person (the liquidator) take control of the company so that its affairs can be wound up for the benefit of creditors.
A company does not need to be insolvent in order to be wound up, instead the director’s can apply for voluntary liquidation. This is the most dignified and favoured way for the directors of a company to deal with financial difficulties. Directors of a company risk being found personally liable when a company is found to be trading insolvent, so it is vital that directors take action at an early stage.
A compulsory liquidation is ordered by the court, following a petition by creditors, the company itself or a shareholder. A liquidator is then appointed by the Court to wind up the company. After a company goes into liquidation, unsecured creditors can no longer commence or continue legal action against the company.
Is your company unable to pay its debt? Are you looking for answers? Contact our experienced tax lawyers here at The Quinn Group who can help you through this stressful time. Submit an online enquiry at www.preinsolvencysolutions.com.au or call 1300 QUINNS (784 667).