CORPORATIONS ACT 2001 - SECT 1.5.12 Companies in financial trouble
CORPORATIONS ACT 2001 - SECT 1.5.12
Companies in financial trouble12.1 Voluntary administration
If a company experiences financial problems, the directors may appoint an administrator to take over the operations of the company to see if the company's creditors and the company can work out a solution to the company's problems.
If the company's creditors and the company cannot agree, the company may be wound up (see 12.3).
12.1A Restructuring
If a company experiences financial problems, the directors may appoint a small business restructuring practitioner to help the company develop a plan to restructure.
If the company's creditors do not agree to the plan, the company may be placed in voluntary administration (see 12.1) or wound up (see 12.3).
12.2 Receivers
A receiver, or receiver and manager, may be appointed by order of a Court or under an agreement with a secured creditor to take over some or all of the assets of a company. Generally this would occur if the company is in financial difficulty. A receiver may be appointed, for example, because an amount owed to a secured creditor is overdue.
12.3 Winding up and distribution
A company may be wound up by order of a Court, or voluntarily if the shareholders of the company pass a special resolution to do so.
A liquidator is appointed:
• when a Court orders a company to be wound up; or
• the shareholders of a company pass a resolution to wind up the company.
12.4 Liquidators
A liquidator is appointed to administer the winding up of a company. The liquidator's main functions are:
• to take possession of the company's assets; and
• to determine debts owed by the company and pay the company's creditors; and
• to distribute to shareholders any assets of the company left over after paying creditors (any distribution to shareholders is made according to the rights attaching to their shares); and
• finally, to have the company deregistered.
12.5 Order of payment of debts
Generally, creditors who hold security interests in company assets are paid first.
12.6 Cancellation of registration
If a company has ceased trading or has been wound up, it remains on the register until ASIC cancels the company's registration. Once a company is deregistered, it ceases to exist.
[sections 601AA--601AB, 601AH]