Liquidation
When a corporation is wound up, it goes into liquidation.
The liquidator is in charge of the corporation and the directors have no power to make decisions. If the corporation hasn't already stopped trading, the liquidator will decide whether to continue operations or stop trading.
The liquidator’s job is to sell the corporation’s assets and use the money to pay as many bills as possible.
Appointing a liquidator
Liquidators can be appointed by:
- corporation members
- a court
- a voluntary administrator.
Corporation members appoint a liquidator as part of agreeing to a special resolution to wind up the corporation. Courts will appoint a liquidator when they grant a petition to wind up a corporation.
The liquidator must be independent and registered as a liquidator. They’re usually an accountant.
What happens during a liquidation
The liquidator will:
- collect and sell the corporation’s assets
- try to work out why the corporation failed (for insolvent corporations)
- identify any misconduct and report to the Registrar.
They’ll also review the corporation’s affairs and report to the creditors:
- what the liquidator has done
- what is still to be done
- an estimate of when the liquidation will finish.
The liquidator may call a meeting of creditors to:
- talk about the liquidation
- find out their wishes on certain matters.
Leftover or surplus assets
After the liquidator is paid, any funds left are used to pay creditors. This is done in a certain order.
If there’s still money left over after all creditors are paid, the liquidator will check the corporation's rule book and follow any rule about how to distribute surplus assets (many corporations have rules that say the money must be given to another organisation with similar objectives.)
If the corporation doesn’t have a rule they’ll need to call a meeting of members to pass a special resolution about how to distribute the surplus assets.
If neither of these happen, the liquidator will ask for an order from the court on how to distribute surplus assets.
The end of liquidation – deregistration
After assets are sold and money is paid out, the liquidator will lodge a final report with the Registrar to say that the liquidation is complete. The Registrar then completes the final step of deregistration.
If the liquidator fails to lodge their final report with the Registrar and more than 6 months has passed, the Registrar has a power under the CATSI Act to deregister the corporation – see more about Registrar-initiated deregistration.
Any corporation assets or property that are discovered after the deregistration is complete will vest with the Registrar.