Hurry to put your company into liquidation and you are in for a major loss. A pre-liquidation review is must and so is a comprehensive planning. Any liquidator or insolvency consultant skipping these two steps is to be avoided at all costs. However, as a director to the company, there are more numbers of things that you must understand, fulfil and execute.
Without sufficient understanding of the perceived outcome of liquidation, it is unwise to jump into it. From the agreement to the professional review, counting every step is valuable before you decide to go for the liquidation procedure.
A liquidator who immediately gets into the process without confirming the prior steps is not competitive enough. He/she must check thoroughly your pre-liquidation planning, of which, the state of the firm’s finances is a major point. It is a fact finding exercise and the liquidator, or insolvency consultant should do in your presence. If necessary, the liquidator must also allow you recommendations from others. The pre-liquidation review is a free service and it is done only in your company premises.
If an appointed liquidator doesn’t take into account the expectations of the shareholders and the directors of the company, know that something is wrong. The liquidator just can’t liquidate your company if 75% of the shareholders and the directors don’t want it. The liquidator must officially see the shareholders’ agreement of liquidation first by officially holding a shareholders’ meeting, where he/she will pass the most appropriate resolutions. Also, at least 51% or more shareholders must agree in choosing the liquidator; if the one chosen by the company proves to be insufficient.
Creditors who have a debenture or security against company assets cannot vote unless they value their security. Secured creditors are on the whole (but not limited to) organisations such as banks, factoring companies and hire purchase companies.
The liquidator must allow the Directors to give a 14 days’ notice to the shareholders of the company for a general meeting to be held, both in writing and through adverts in a newspaper with a large circulation.
The company accounts, if necessary and the details of charges over any company assets also must come under the scrutiny of a liquidator, lest the company wants to enter an alternative insolvency procedure. This could be a Pre-Pack Insolvency Services Sydney, Pre-Pack Administration or a Company Voluntary Arrangement. If the liquidator insists on not keeping the options open, you are in for trouble.
The CPA Sydney must follow the 1986 Insolvency Act, so it’s your duty to verify that the person knows and understands it well; for which, you also need to understand it well. According to it, the insolvency practitioner can only exercise the powers when:
i. Taking control of assets is absolutely necessary to protect the value of the assets for the benefit of creditors.
ii. The assets are not perishable (e.g. food and livestock).
iii. Justification to proposed action has been accepted at the creditors meeting, for which, they should be informed at least 7 days beforehand.