WHAT IS AVERAGE COST OF A LIQUIDATION?
ASIC has never published the average cost of a liquidation in Australia.
We estimate the average cost of a liquidation is about $10,000.
But it’s a hard number to quantify. ASIC reports that about 25% of liquidations have no assets to pay the liquidator. These “no funds jobs” will result in the unlucky liquidator writing off their time for their services and disbursements. In this instance, the liquidator has taken the job on without knowledge it’s a no funds matter or they have agreed to take good jobs with bad jobs from a substantial referrer (like the ATO).
ARE THERE FREE LIQUIDATION SERVICES?
There’s no such thing as free liquidation services in Australia.
The government offers free bankruptcy services for people who need to declare bankruptcy, but it does not offer a free company liquidation service. All liquidations in Australia are administered by private liquidators who only offer their services to make a profit.
If there is a big preference or an insolvent trading claim action against a director or third party who has the resources to pay the claim, all liquidators will be eager to take on a liquidation, even if there are no tangible assets or money up front. That’s the nature of liquidation work.
Accordingly, it is vital that directors do not blindly accept the lowest “Up front fixed quote” to do a liquidation. Directors must always be aware of the available recovery actions and how the liquidator will be paid before making an appointment.
Directors should also be mindful, that even if a director has no money at the time of liquidation, claims by a liquidator against a director can be initiated up to 6 years after the date of liquidation.
WHAT DOES THE LIQUIDATOR DO?
The liquidator will:
- Identify, locate and protect the assets of the company;
- Sell the company assets;
- conduct investigations into the financial affairs of the company;
- pursue any voidable transactions like preference payments or breach of director’s duties;
- report to creditors;
- Attend to statutory duties and reporting to ASIC;
- Convene meetings of creditors and have regard to their view;
- Pay dividends if possible;
- Deregister the company and destroy the books and records
DO LIQUIDATORS REQUIRE QUALIFICATIONS?
Yes. It takes about 7 to 10 years to become qualified as a liquidator.
CAN PRE-INSOLVENCY ADVISERS HELP?
Perhaps. However, if they are not qualified liquidators then you might be paying only for advice. The adviser will then charge more as they will need to pay a registered liquidator who actually performs the task of winding up a company.
Some pre-insolvency advisers often know enough to give the appearance of being experts, but their experience and insolvency skill will be grossly inadequate compared to those of a qualified and experienced liquidator. It is strongly recommended that all directors take control of the rescue process and do the research to ensure they understand the solutions offered and the background of their advisers. Further, directors should be sceptical of any “turnaround expert” who requests a large introduction or consulting fee up front. The recent Federal Government Senate Report into Insolvency clearly states most professionals in the insolvency industry work on a scale of fees based on an hourly rate.
WHAT DO I DO TO LIQUIDATE MY COMPANY?
Directors and shareholders need to sign and return statutory forms to our office. The Statutory forms can be a bit confusing but we will walk you through the process.
HOW LONG DOES IT TAKE LIQUIDATE A COMPANY?
Generally, it only takes a few hours to put a company into liquidation.
If somebody has initiated court proceedings to liquidate your company, you will not be able to put the company into liquidation. However, it will be possible to appoint a Voluntary Administrator.
CAN A COMPANY TRADE ON DURING A LIQUIDATION?
Yes. The liquidator will trade on a business if it is in the interests of creditors to do so. Generally the liquidator will cease trading upon appointment due to inadequate resources to permit ongoing trading. From time to time a business may trade on for a few weeks to enable it to be sold as a going concern, or in order to complete and sell any current works in progress.
WILL LIQUIDATION AFFECT MY CREDIT RATING?
Yes, the director’s credit file will reflect a default. But generally directors can still obtain finance if they have other assets and income.
AM I PERSONALLY LIABLE FOR THE COMPANY DEBTS?
Generally speaking, directors are not liable for the debts of their company.
The exceptions to that rule are:
ATO debts if the company has failed to lodge (not pay) on time.
The law regarding this issue is complex and it is always worthwhile getting into the detail of these issues before appointing a liquidator.