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 ]

12.2   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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