Exiting a business

Winding up a business

Winding up or liquidation is the orderly winding up of a company's affairs under s491 of the Corporations Act 2001 (the Corporations Act).

It involves realising the company's assets, cessation or sale of its operations, distributing the proceeds of realisation among its creditors and distributing any surplus among its shareholders.

The three types of liquidation are:

• court – a liquidation that starts as a result of a court order, made after an application to the court, usually by a creditor of the company.
• creditors' voluntary - a liquidation initiated by the company
• members' voluntary - a liquidation initiated by the members or shareholders of the company

Winding up a solvent company

If you plan to wind up a solvent company you will need to deregister with the Australian Securities and Investment Commission (ASIC). Even after it ceases trading, a registered company is still subject to all of the legal requirements of a registered company including payment of the annual review fee.

A company ceases to exist on deregistration.

To wind up your company you need to ensure that the following requirements have been met:

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

ASIC provides comprehensive information on winding up company on their website.