Australian companies may be wound up by the Court if they are insolvent. The Corporations Act defines a company is insolvent if it is unable to pay its debts as and when they fall due.
Whether you are the one owed money, or it’s your company being accused of trading insolvent, you need to act
Someone who hasn’t received the money they are owed will generally be the one applying to the Court.
In Australian courts the Australian Tax Office (ATO) is the most common applicant (by number). Workers Compensation Insurers are next, followed closely by State Government agencies.
The Court may order the winding up of the company and the appointment of an Official Liquidator to administer the affairs of the company. An application to wind up a company may be brought before the Supreme Court of each State in Australia or alternatively the Federal Court of Australia. Often an application to wind up a company will be on the grounds that the company failed to satisfy a statutory demand (explanations below).
As Directors of a company you should quickly seek legal advice if you have received a statutory demand or an application to wind-up your company.
You do have alternatives if you act quickly. Company Directors may consider the appointment of a voluntary administrator. To be successful you may need to demonstrate to the Court that there is a good prospect that the administration process will result in a better outcome for creditors than if the company was wound up by the Court.
Call us for a free no-obligation phone consultation to understand your options 1300 795 575.