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CORPORATIONS ACT 2001 - SECT 1.5.12

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]

12.2 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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