Winding up (liquidation)
What is winding up?
Winding up is a process to finalise a corporation’s affairs and end its existence.
It involves a form of external administration also known as liquidation. The liquidator takes control of the corporation’s affairs, selling the corporation’s assets to pay debts. Once this is finished, the corporation is deregistered. That is, it no longer exists.
Winding up can be:
- voluntary – the members make the decision, or
- ordered by the court – someone applies to court for an order.
The decision to wind up and the wind up process may be different based on the solvency of a corporation.
Solvent means that a corporation can pay its debts, as and when they fall due.
Insolvent means that a corporation cannot pay its debts, as and when they fall due.
If a corporation is solvent:
- members can decide to wind up voluntarily
If a corporation is insolvent:
- members can decide to wind up voluntarily
- someone can apply to court for an order to wind up.
Comparing voluntary winding up to court-ordered winding up
Below we’ve provided a simple comparison between the types of wind ups. More information is available about voluntary winding up and court-ordered winding up
| Voluntary winding up | Court ordered winding up |
| Members make the decision (pass a special resolution) to wind up the corporation and appoint a liquidator. | Any one of the parties listed below can apply to a court for an order to wind up the corporation and appoint a liquidator.
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How is the winding up started?
| Voluntary winding up | Court ordered winding up |
There are different types of voluntary winding up depending on the corporation’s solvency:
The first step is for the directors to declare the corporation is either solvent or insolvent. Next, the directors call a general meeting for members to pass a special resolution to wind up the corporation. At the same meeting, the members appoint the liquidator. | The applicant decides the reason they want to ask for a winding up. These reasons (grounds) are set in section 526-5 of the CATSI Act – see the list of who can apply and for what reasons on our webpage about Court-ordered winding up. If a creditor wants to apply because the corporation is insolvent, the creditor must first go through a process of serving the corporation with a statutory demand for payment. If the corporation doesn’t pay the debt or dispute the demand within 21 days, then the creditor can presume insolvency and file an application with the Court for winding up. For any of the other reasons, the relevant applicant files an application with the Court. |
What happens next?
| Voluntary winding up | Court ordered winding up |
The corporation is now in liquidation. The directors no longer have an active role in running the corporation but they must support the liquidator. The liquidator takes control of the corporation, they collect and sell the corporations assets, repay any creditors, and investigate the affairs of the corporation. Once the liquidator has completed the wind up and reported to ORIC, ORIC will deregister the corporation. | Unless the corporation opposes the application, it is likely the court will make an order for the corporation to be wound-up. The court appoints a liquidator. The directors no longer have an active role in running the corporation but they must support the liquidator. The liquidator takes control of the corporation, they collect and sell the corporation’s assets so that money can be paid to any creditors, and investigate the affairs of the corporation. Once the liquidator has completed the wind up and reported to ORIC, the liquidator applies to the court for release and for ORIC to deregister the corporation. |
For more information on the different types of winding up, see our voluntary winding up and court-ordered winding up webpages.