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Winding is a process which may be voluntary or court ordered. 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 has the power to exercise its discretion 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. Detailed and sound advice from a Bankruptcy and Insolvency Lawyer throughout this complex and procedural process can be of immense value.

Although the varieties of winding up have quite different historical origins, they are now all governed by a statutory scheme which, while making separate provisions for winding up by the court and voluntary winding up, also has many common provisions applicable to all kinds of winding up. The procedure to be followed when a company is being wound up varies in detail according to whether this is done compulsorily under an order of the court or voluntarily pursuant to a resolution of the company in general meeting, and, in the latter case, whether it is a members' voluntary winding-up or a creditors' voluntary winding-up; but the essential characteristics of the scheme for dealing with the assets of the company do not differ whichever of these procedures is applicable. Having proper legal and financial advice from a network of skilled Bankruptcy and Insolvency professionals may be immensely useful in this regard.

A company may be wound up voluntarily if the members in general meeting so resolve by special resolution. The company in general meeting must appoint a liquidator or liquidators to wind up the affairs and distribute the property of the company. The company bears the onus of proving that a voluntary winding up is preferable to other options such as Deed of Company Arrangement, Receivership or Administration. Liquidation cannot be used as an abuse of process where the process is used as a means of obtaining some advantage for which it was not designed. Directors need to make the declaration that they have reasonable grounds for thinking that the company will be able to pay its debts in full within a period of not more than 12 months after the commencement of winding up. Proper legal advice by a Bankruptcy and Insolvency Lawyer may be advantageous to ensure that you comply with your obligations and have your rights protected whether as a creditor or director.

Alternatively, if a declaration of solvency is made the winding up proceeds as a members’ voluntary winding up: otherwise the winding up proceeds as a creditors’ voluntary winding up. There are various implications of a creditor’s voluntary winding up such as the discontinuance of the director’s powers, the cessation of company operations unless permitted by the liquidator, persons may be ordered to transfer property to the liquidator, all correspondences by the company must bear the words ‘in liquidation’ and employee’s contract for service may continue. Thorough and sound advice from a Bankruptcy and Insolvency Lawyer may be invaluable throughout this process.

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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