Court liquidation is when the Court orders a company to be wound up and appoint a Liquidator to step in and act.
This often occurs in the context of a creditor who is owed money applying to the Court for a liquidator to be appointed. However, there are also a number of other parties including the company, a shareholder, director or the Australian Securities and Investments Commission who can apply to the Court for the appointment of a Liquidator.
Once it is in the hands of the Court a number of factors may compel it to appoint a liquidator.
- Firstly, where the company is proven to be insolvent;
- If the directors have acted recklessly or in their own interest;
- Where the Court is of the opinion that the interests of the public, stakeholders or creditors are best served by liquidation;
- Where the Court is of the opinion that it is just and equitable for the company to be wound up.
Once a liquidator has been appointed, he/she assumes control of the company with their main role to realise the company’s assets and distribute the funds to the creditors. If there is surplus, then the Liquidator distributes the remaining portion in line with the priorities established under the Corporations Act 2001 (Cth).
In addition to this the Liquidator has another important purpose as an independent and qualified party to investigate the affairs of the company, including its financial history, any instances of insolvent trading, potential preference payment deals or any other offence that may need to be reported to the Australian Securities and Investments Commission (ASIC).
As a leading insolvency expert and Liquidator, Jonathan Paul McLeod has over 30 years’ experience to draw on when advising companies in all areas of liquidation, including ways to avoid financial trouble in the first place. For more information please contact Jonathan McLeod on (07) 3004 0800.