Winding up a solvent company – the three options

Wanting to wind up your solvent company but not sure which method to use?

You may have shut your business’ doors, paid out all your creditors (or have enough assets to do that anytime) and be looking into the best way to finalise your company’s affairs. Generally speaking, there are three ways to do this.

A brief explanation of each alternative

Members Voluntary Liquidation (“MVL”)

What it is: An MVL is a formal procedure where the shareholders appoint a Liquidator to distribute the company’s surplus assets (if any) and to procedurally finalise all outstanding affairs of the company.

Advantages: A formal procedure means that it will be difficult for anyone to re-instate the company in the future. Tax benefits might also be available for some companies (those who have pre-CGT profits or SBE concessions).

Disadvantages: The liquidation process is relatively longer than the alternative below and would be more costly. However, at Insolvency Solutions Group, our quotes are often much less than that of a Big 4 Accounting firms. Why not give us a call to talk about your options?

If you would like to learn more about the Members’ Voluntary Liquidation, please access our full Members’ Voluntary Liquidation guide created by Insolvency Solutions Group’s specialists explaining this in detail.

Voluntary Deregistration

What it is: A direct lodgement with the regulator with an application fee of $36*

Advantages: Deregistration is cheaper than an MVL. It is also quicker to deregister your company. What the regulator does is simply place a notice onto the Insolvency Notices Website advising that it will deregister the company 2 months from the notice date. If they do not receive any objections from the public during this time, they will deregister the company at the end of the 2 months.

Disadvantages: This method is only available to those who meet the criteria for Voluntary Deregistration. The criteria are:

• all members of the company agree to deregister;
• the company is not carrying on business;
• the company’s assets are worth less than $1000;
• the company has no outstanding liabilities;
• the company is not a party to any legal proceedings; and
• the company has paid all fees and penalties payable under the Corporations Act 2001.

Further, should anyone wish to re-instate the company in the future, they can easily do this by applying to Court.

*As per the regulator’s website as at 27 May 2013.

Forced Deregistration (not recommended!)

What it is: Where the regulator deregisters your company due to inactivity. They will do this if it believes that your company is inactive, which is usually as a result of the company’s failure to lodge documents and pay fees.

Advantages: it’s free.

Disadvantages: Similar to that of a Voluntary Deregistration, companies deregistered this way can be easily re-instated. Further, it is “not a good look” for the regulator to be taking action against your company for failure to lodge documents.