Court-ordered winding up

A range of people can apply to the Federal Court to wind up a corporation (place it into liquidation):

  • the corporation
  • a creditor of the corporation (even if the creditor is a secured creditor or is only a contingent or prospective creditor)
  • a member of the corporation
  • a director of the corporation
  • a contributory of the corporation
  • a voluntary administrator of the corporation
  • a special administrator of the corporation
  • the Registrar.

Reasons to apply for court-ordered winding up

The reasons or grounds that someone can apply to Court for a winding up order include:

  • the corporation has by special resolution resolved that it be wound up by the Court
  • the corporation has been registered for a year and hasn’t started operating or has suspended operations for longer than a year
  • the corporation has stopped meeting one or more of the requirements for being registered under the CATSI Act
  • the corporation has become a trade union which is not allowed under the CATSI Act
  • the officers of the corporation have acted in their own interests rather than in the interests of the members of the corporation as a whole, or in a way that is oppressive or unfairly prejudicial or discriminatory against a member or members of the corporation (unless the officer was acting to comply with a requirement of native title legislation)
  • the corporation is insolvent (for this ground, the following people can apply only if the Court gives permission for them to do so: a person who is a creditor only because of a contingent or prospective debt; a contributory; a director; the Registrar.)
  • that winding up the corporation is in the interests of the public; the corporation’s members; or the corporation’s creditors.

The Registrar is the only person who can apply for winding up on these grounds:

  • the directors have failed to comply with a notice from the Registrar to comply with the CATSI Act (known as a section 439 20 notice)
  • the corporation has failed to lodge its reports under the CATSI Act
  • the complexity or magnitude of corporation’s activities make it inappropriate for the corporation to stay registered under the CATSI Act.

If a corporation is under special administration only the Registrar or special administrator can apply.

Most common reason for applying

The most common reason someone makes an application to the Court is when a creditor seeks payment of a debt from the corporation. 

The creditor first sends the corporation a Statutory Demand for Payment. 

After the period stated in the Statutory Demand for Payment has passed and if the corporation has not addressed the matters (such as paid the creditor, come to an agreement with the creditor about payment or taken other regulatory action) the creditor can then ask the Federal Court to place the corporation into liquidation.

If the corporation disputes the amount claimed in the statutory demand, it is very important that it seek legal advice and take the necessary steps to dispute the claim before the period stated in the statutory demand for payment has expired.

The creditor can ask the court to have the corporation wound up. This is called a ‘petition for winding up’. If the court grants the petition, the court will then appoint a liquidator for the corporation.

What to do

We recommend corporations seek legal advice if they receive a statutory demand or notice of court action.

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