Members Voluntary Liquidation

IMG

Why commence a members voluntary liquidation?

This appointment is used when the company has reached its useful life, the company has ceased to trade, and the assets of the company are to be distributed to the shareholders (also known as members) of the company.

The company must be solvent, that is, it can pay all of its debts, and any remaining assets are then distributed back to the members in accordance with their shareholdings.

At the completion of the liquidation, the company will be deregistered.

How is the company placed into liquidation?

The process to place the company into members voluntary liquidation (MVL) is commenced by the directors, who after having concluded that the company is solvent, will convene a meeting of the members to place the company into liquidation.

The company is placed into liquidation immediately after the special resolution of the members is passed to put the company into liquidation. Members will also appoint a liquidator to conduct the liquidation.

Numerous forms are lodged with the Australian Securities and Investments Commission (ASIC) in relation to the appointment.

Who has control of the company after it is placed into liquidation?

Once the company is placed into liquidation, the powers of the directors cease, and the assets and affairs of the company come under the control of the liquidator.

In most cases, the company will have ceased trading at the time of the appointment, and the company’s remaining assets will be represented by a small number of asset classes.

These assets can then be called in and realised by the liquidator to provide for a cash distribution to the members. Alternatively, certain assets may be assigned to the shareholders as a distribution in specie as part of their dividend entitlement to prevent the need to call in and realise certain assets.

What delays might be encountered?

A liquidator will seek to obtain what is referred to as the Notified Amount from the Australian Taxation Office (ATO) prior to declaring a dividend to the members.

The Notified Amount is often referred to as a tax clearance.

Any lodgements that remain outstanding to the ATO from the company up to the date of the liquidation will delay the receipt of the notified amount from the ATO.

Upon the receipt of the notified amount, the liquidator will seek to commence the process to allow for the distribution of the assets of the company to meet the claims of creditors and return the surplus funds to the members.

Once the assets of the company have been recovered and distributed to the members, the liquidator will notify the Australian Securities and Investments Commission (ASIC) of the finalisation of the liquidation.

After receiving the notice of finalisation of the matter, ASIC will arrange to deregister the company within approximately 3 months.

Please contact us for further information regarding how a members voluntary liquidation may be appropriate to deal with your company.

 

Having Insolvency Concerns?

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