Corporations Act 2001

CHAPTER 1 - INTRODUCTORY  

PART 1.5 - SMALL BUSINESS GUIDE  

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 ]

12.1A   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 ]