Members’ Voluntary Liquidation
A Members’ Voluntary Liquidation occurs when the company meets with its members and agrees to wind up the company, even though it is still solvent. A company that is able to meet its financial obligations may decide to wind up for numerous reasons. Whether the company has simply reached the end of its usefulness or the directors and members have a mutual belief that now is an ideal time go their separate ways, a members’ voluntary liquidation is the best way to realise the company’s financial situation and distribute the funds among the creditors and members as required.
The process begins with a members meeting to decide that Members’ Voluntary Liquidation is the best solution for them. The company must also be solvent and the directors must complete a ‘declaration of solvency’, stating that the company is solvent and that the company can pay all its debts within 12 months. This declaration should be lodged with ASIC prior to the members meeting. Upon agreement of the members at the meeting, the company is passed into liquidation.
A liquidator is appointed to the company and begins to realise the company’s assets. During the liquidation the liquidator may allow the company to trade if s/he feels it is in the best interest of the creditors. At the completion of his or her investigation, the liquidator will report their findings to the Australian Securities and Investment Commission and hold an informative meeting with the members. The liquidator is not required to update the members or creditors during their investigation, but may do so upon request.
Upon completion of the liquidation the liquidator will distribute the funds, as required by law, in order of: liquidation costs and expenses, employee entitlements, creditors and then members. Each group is paid in full until there is no money remaining. Once the funds are distributed, the company is deregistered and ceases to exist.
Insolvency Advisory Accountants can help guide you through your company’s insolvency and put you back on the path to financial stability today. Our services come with a free, no obligation initial consultation to ensure that we understand your financial situation and can recommend the best strategy to get you out of debt as soon as possible.