A Court may order a company to be wound up and appoint an Official Liquidator to act. Such orders may be made:
- Where the company is proved to be insolvent,
- if the directors have acted in their own interests, rather than in the interests of the shareholders of the company,
- where the Court is of the opinion that the interests of the public, shareholders or creditors are best served by that course of action, or
- where the Court is of the opinion that it is just and equitable that the company be wound up.
Any one of the following can apply to the Court for the appointment of a Liquidator:
- the company;
- a creditor;
- a shareholder;
- a director; or
- the Australian Securities and Investments Commission.
The Liquidator has extensive powers to displace the directors and assumes full control of the company’s affairs. His main task is to take possession of the company’s assets and realise them so that the surplus funds can be distributed to creditors. Where the assets are more than sufficient to meet the claims of creditors, the surplus funds are distributed to the members in accordance with the company’s Constitution. The Liquidator may continue the business of the company to enable the beneficial disposal or winding up of that business.
In addition to realising the company’s assets the Liquidator may:
- sue the directors for insolvent trading,
- have certain transactions entered into by the company prior to the appointment of the Liquidator declared void,
- publicly examine any person who has been associated with the company, and
- seek to recover from creditors amounts which were paid to them at a time when the company was insolvent within the six months prior to the commencement of the liquidation.
The above information is by necessity, general in nature and its brevity could lead to misunderstanding. For further information, you are invited to contact O’Brien Palmer.