Voluntary winding up
Voluntary winding up is a process where members decide to appoint a liquidator to finalise their corporation’s outstanding matters. After the corporation’s affairs are settled by the liquidator, the corporation can be deregistered.
We recommend that directors speak to an accountant or other financial professional before taking steps to wind up a corporation.
Types of voluntary winding up
There are 2 types of voluntary winding up:
- members voluntary liquidation – this is an option only if the corporation is solvent. Solvent means it can pay its bills when they fall due.
- creditors voluntary liquidation – this option is for a corporation that is insolvent. Insolvent means it doesn’t have enough money to pay its bills when they’re due.
What's the difference?
A members voluntary liquidation usually doesn’t involve creditors because the corporation has enough money to pay them out.
A creditors voluntary winding up requires the liquidator to consult and hold meetings with creditors about paying off debts.
What is a creditor?
A creditor is anyone the corporation owes money to. For example, customers who paid for goods but haven’t received them; funding bodies who have provided funding but services haven’t yet been delivered; suppliers who have provided goods or services that the corporation hasn’t yet paid for; employees with outstanding wages or superannuation; unpaid amounts owing to the ATO.
Who starts it?
Members do – by passing a special resolution.
Situations when members cannot choose voluntary winding up
Members cannot decide to voluntarily wind up if:
- a court has already ordered the corporation be wound up
- the corporation is under special administration.
What directors need to do
The first step to voluntarily winding up a corporation is for the directors to:
- pass a resolution about the corporation’s solvency position
- find a liquidator
- call a general meeting proposing a special resolution for the member’s to approve to wind up the corporation and appoint a liquidator.
Declaration of solvency
At a directors’ meeting, directors pass a resolution declaring either the corporation is:
- solvent and can pay all its debts within 12 months. Fill in and sign a ‘Declaration of solvency’ (use ASIC’s Form 520) and lodge it with ORIC, or
- insolvent.
The directors then call a general meeting of members proposing a special resolution to wind up the corporation and to appoint a liquidator – remember for a special resolution, the exact words of the special resolution must be in the notice.
Look for a potential liquidator
The directors should prepare for the general meeting by seeking a proposal from a liquidator.
You can find a registered liquidator on ASIC’s registered liquidator lists. You can then see their full details using ASIC’s professional registers search.
Call a general meeting
The directors then call a general meeting of members. In the notice of meeting, they must include the exact words of their proposed special resolution to wind up the corporation and to appoint a liquidator.
What members need to do
At the general meeting members vote on the special resolution to wind up the corporation and appoint a liquidator. Remember, for a special resolution to pass, at least 75% of the votes cast at the meeting must agree to it.
The result
If members pass the special resolution
Members then decide who will be the liquidator.
The corporation will then be in liquidation.
The liquidator must notify us of their appointment within 14 days after the appointment using this form: Form 505 Notification of appointment or cessation of an external administrator
If members do not pass the special resolution
The directors can apply for a court order to wind up.
We recommend directors seek legal advice before taking this step.
Wind up corporation affairs and deregistration
The liquidator collects the corporation’s assets and sells them to repay any creditors. Any funds left over must be distributed in line with the corporation’s rule book.
The liquidator must lodge with us a list of receipts and payments for the liquidation every year until the liquidation ends. Liquidators must use this form: Form 5602 Annual administration return
When the winding up is finished, the liquidator must notify us within one month. Liquidators must use this form: Form 5603 End of administration return
Three months after the liquidator lodges the Form 5603, ORIC deregisters the corporation. After the corporation is deregistered it no longer exists.