Commonwealth Consolidated Acts

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Companies in financial trouble

12.1 Voluntary administration

    If a company experiences financial problems, the directors may appoint an administrator to take over the operations of the company to see if the company's creditors and the company can work out a solution to the company's problems.

    If the company's creditors and the company cannot agree, the company may be wound up (see 12.3).

[Part   5.3A]

12.1A Restructuring

    If a company experiences financial problems, the directors may appoint a small business restructuring practitioner to help the company develop a plan to restructure.

    If the company's creditors do not agree to the plan, the company may be placed in voluntary administration (see 12.1) or wound up (see 12.3).

[Part   5.3B]

12.2 Receivers

    A receiver, or receiver and manager, may be appointed by order of a Court or under an agreement with a secured creditor to take over some or all of the assets of a company. Generally this would occur if the company is in financial difficulty. A receiver may be appointed, for example, because an amount owed to a secured creditor is overdue.

[Part   5.2]

12.3 Winding up and distribution

    A company may be wound up by order of a Court, or voluntarily if the shareholders of the company pass a special resolution to do so.

    A liquidator is appointed:

  when a Court orders a company to be wound up; or

  the shareholders of a company pass a resolution to wind up the company.

[Parts   5.4, 5.4B, 5.5].

12.4 Liquidators

    A liquidator is appointed to administer the winding up of a company. The liquidator's main functions are:

  to take possession of the company's assets; and

  to determine debts owed by the company and pay the company's creditors; and

  to distribute to shareholders any assets of the company left over after paying creditors (any distribution to shareholders is made according to the rights attaching to their shares); and

  finally, to have the company deregistered.

[Parts   5.4B, 5.6]

12.5 Order of payment of debts

    Generally, creditors who hold security interests in company assets are paid first.

[Division   6 of Part   5.6]

12.6 Cancellation of registration

    If a company has ceased trading or has been wound up, it remains on the register until ASIC cancels the company's registration. Once a company is deregistered, it ceases to exist.

[sections   601AA--601AB, 601AH]


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