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Whether you’re in a situation where you may need to wind down a company or not, as a business owner, it’s worth understanding the difference between de-registration and voluntary liquidation.
They are two legal processes that can be used to wind up a business in Australia and while they may appear to be similar, there are some important differences between the two that can impact a company's owners, creditors, and other stakeholders.
De-registration is the process of officially cancelling a company's registration with the Australian Securities and InvestmentsCommission (ASIC). It is typically used for small companies that are no longer active and have no outstanding liabilities or legal disputes. In order to de-register a company, the directors must ensure that all tax obligations have been met, any outstanding debts have been paid, and all assets have been distributed to shareholders or transferred to another entity.
Voluntary liquidation, on the other hand, is a more formal process that involves appointing a liquidator to wind up the company's affairs.This process is typically used when a company is insolvent, meaning it cannot pay its debts as they fall due, or when the directors decide that the company is no longer viable and wish to wind it up. The liquidator is responsible for collecting the company's assets, paying off its creditors, and distributing any remaining funds to shareholders.
One key difference between de-registration and voluntary liquidation is the level of involvement required from ASIC. When a company is de-registered, ASIC is not involved in the process beyond processing the de-registration application. However, in a voluntary liquidation, ASIC must be notified of the appointment of the liquidator and the progress of the liquidation.
Another key difference is the impact on the company's directors. In a de-registration, the directors are responsible for ensuring that all legal requirements have been met before applying for de-registration.Once the company is de-registered, the directors are no longer liable for any outstanding debts or legal disputes. However, in a voluntary liquidation, the liquidator may investigate the conduct of the directors leading up to the liquidation and take action against them if they are found to have breached their duties.
For creditors and other stakeholders, there are also important differences between de-registration and voluntary liquidation. In a de-registration, creditors have no recourse against the company once it has been de-registered, so it is important for them to ensure that all debts are paid before the de-registration takes place. In a voluntary liquidation, creditors may be able to recover some or all of the amounts owed to them through the liquidation process, although this will depend on the value of the company's assets and the number of creditors.
As with any business decision that has such wide reaching implications, it is important to speak with the Attune team before deciding which process is most appropriate for your circumstances. We’re here to helpwith tailored, strategic advice to ensure you take the right path forward. Call the team on 1300 866 113 or send us an email to start the conversation.
