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The process of insolvency, particularly liquidations, can be a stressful, taxing and time consuming ordeal. Liquidation can occur in a number of ways and involves the assets of the company being sold or liquidated in an expedited manner to raise funds to satisfy the debts owed by the creditors of a company in an equitable and structured process. A creditor of a company that has an unresolved debt owed by a company can apply to have that company wound up and for liquidation to occur. Similarly, a company that is unable to pay its debts may apply to the court and voluntarily enter into liquidation. Consultation with an experienced Bankruptcy and Insolvency Lawyer can assess your company’s needs, goals and expectations and ensure that there are adequate protections against liquidation. However, should your company be in the process of liquidation it is important that legal advice be obtained to ensure that all legal obligations are complied with and the process of liquidation is as smooth and problem free as possible.

Firstly, liquidations can be creditor appointed based on the insolvency ground. This is usually initiated by statutory demand, but there are other methods such as,  taking action to enforce a charge or mortgage. A statutory demand is served on a company for a debt of at least $2,000 due and payable and requires the company to pay or secure for the amount due within 21 days after service. If the company fails to do so then the creditor can apply to the court to have the company wound up and liquidated to satisfy the debt. Liquidation is a process that is enlivened if a company has insufficient property to discharge their liabilities, as it is a procedure to ensure that the orderly and rateable distribution of that property among the creditors, secured and unsecured, is effected.  Obtaining professional legal advice from a qualified and experienced Bankruptcy and Insolvency Lawyer can assist you should you be served with a statutory demand of face winding up action by a creditor.

Secondly, a company may be wound up voluntarily if the members in general meeting so resolve by special resolution. A voluntary winding up is controlled by the members if the company is solvent and primarily by the creditors if it is insolvent. The first type of voluntary winding up is called a "members' voluntary winding up". The second is a "creditors' voluntary winding up". But the court is in the background and may be asked by a liquidator or any contributory or creditor to determine any question or to exercise any of the powers which the court has in a compulsory winding up. This may be decided upon if the company is unable to continue to operate and remain solvent or manage to pay its debts when they fall due and payable. This requires the company to apply for the courts leave but first making an application with the court for the winding up of the company on the ground of insolvency; or if the court has ordered that the company be wound up in insolvency. Receiving sound legal advice from a Bankruptcy and Insolvency Lawyer in this regard may be immensely valuable, time and cost effective.

The process of liquidation involves multiples stages with the aim of distributing the assets of the company in a manner which is equitable, just and quick. Liquidation is a process which aims to achieve an orderly and rateable distribution. This process involves collection of all the debtor's property not claimable by secured creditors; the recovery to the debtor's estate of property previously transferred when the debtor was insolvent; a stay of proceedings against the debtor; the process by which claims against the debtor can be asserted and quantified and finally scale of priorities for distribution of the property.

If you would like further information or wish to discuss your liquidation matter with an experienced Bankruptcy and Insolvency Lawyer, please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au.

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This webpage (and any material or wording appearing on this webpage) is provided for general information purposes only and does not constitute any Legal Advice. It does not take into account your objectives, your instructions or all of the relevant facts and/or circumstances. Navado accepts no responsibility to any person who relies on the information provided on this website. We further refer you to our Disclaimer.

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