A5.  What is an Official Liquidation? (Also called a “Court Liquidation”)

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An Official Liquidation is a liquidation ordered by a Court, usually on the application of a creditor.  They differ from a CVL (above) in that they can be ordered whether the company’s directors agree or not, so they are not voluntary.  Official Liquidations and Court Liquidation are the same thing by a different name.  A winding up by the court is started by creditors, directors, shareholders or ASIC.  To start the court liquidation process, a creditor will serve a Statutory Demand on the company to pay a debt pursuant to section 459E of the Corporations Act. Failure to pay the money demanded in a Statutory Demand allows an application to be made to the Court to have the company wound up. The Court orders the appointment of an Official Liquidator.

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Nursing Company Falls/ Failures

We work with companies facing significant financial and operational challenges, including rapidly deteriorating performance trends, excessive leverage, liquidity concerns, loss of key management or clients, and refinancing risk.

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A6.  What is a Provisional Liquidation?

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The appointment of a Provisional Liquidator can be made by a Court upon the application of the company, its directors, or its creditors. In making an application to the Court, evidence is put forward as to the financial state of the company and the reasons for the need to remove the directors from their positions. The most common two reasons given to a Court are that there is a shareholders’ dispute relating to the management of the company and/or the directors are not acting in the interests of the company. The primary role of the Provisional Liquidator is to take control of the company and to preserve its assets. That is, to maintain the “status quo” until the Court can hear an application to wind up the company. During the period of Provisional Liquidation, the director’s powers are suspended. Normally a director does not “choose” Official or Provisional liquidation – they are imposed on the company by the Courts on application.

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A7.  Which type of liquidation do I need?

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If you are a director and you think you might need to liquidate your company, then you need to establish if the company is solvent or insolvent.  If it is insolvent, then you will choose a Creditors Voluntary Liquidation and if it is solvent you will need a Members Voluntary Liquidation.

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A8.  Why would I choose to liquidate my company?

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Liquidation is often a very good option for a director.  Being a director of an insolvent company is stressful and worrying.  A director will be facing pressure from employees, shareholders, the banks and creditors. A liquidation will often:

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• Assist to  protect a director from Insolvent Trading;

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• Assist to protect a director from personal liability for tax debts that might result from a legal claims by IRAS.

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• Relieve a director’s worry and stress by legally bringing the affairs of the company to a close.

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B. THE PROCESS OF  LIQUIDATION​

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B9.  What is the process of a liquidation?

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The process of a liquidation can vary a little depending on whether it is a Creditors Voluntary Liquidation, a Members Voluntary Liquidation or an Official Liquidation.  The liquidator runs the process which will include:

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• Lodgement of various appointment documents with ACRA;

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• Advise various government agencies, such as IRAS etc.;

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• Requesting the director(s) complete a Questionnaire and to deliver the books and records of the company to the Liquidator and do statutory declarations & statements of Affairs;

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• Collects and sells the assets of the company;

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• Prepares a Creditors Report and hold a Creditors’ Meeting;

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• Reviews the books and records and reports findings;

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• Maybe commence recovery processes if there were “hidden assets“ or assets that should be recovered;

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• If funds are available, pay a dividend to creditors;

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• Finalise the liquidation by preparing a Final Report for Creditors, lodge various documents with ACRA and apply for deregistration.

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C. COMMON FEAR /PERCEPTION

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C10.  Does a liquidation affect a director’s credit rating?

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Yes, a liquidation may have an effect on a director’s credit rating, but not a severe effect. Credit Reporting Agencies keep track of companies that enter liquidation (for insolvent companies) and the names of the directors of those companies. However, a liquidation is not bankruptcy whereas a company is a separate legal entity to a director and the company’s directors are not automatically liable for a company’s debts. A personal bankruptcy is a serious black mark on your credit rating – compared to a director of a company that went into liquidation.

 

C11.  Does a liquidation also stop enforcement of personal guarantees?

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No, a creditor with a personal guarantee from a director can still enforce that personal guarantee after a company enters liquidation. If personal guarantees are extensive then it may be worth considering a Voluntary Administration as they are not enforceable whilst the Voluntary Adminstration is in progress.

 

C12.  Can a director of a company in liquidation still be a director of other companies?

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Yes. There is no automatic prohibition on a director of a company that enters liquidation holding another, or many other, directorships. However, the companies Act gives ACRA the power to ban someone from being a director for a period of up to five years if they have been a director of two or more companies that entered liquidation within the last seven years.

 

C13.  Will creditors still contact a director after liquidation?

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Usually creditors will stop contacting a director after a company enters liquidation. The practical situation is that a director’s powers cease on the appointment of a liquidator so it is of no use for a creditor to chase a director. The exception is that a creditor may continue to contact a director if they hold a personal guarantee.

 

D. SERVICES OF THE  LIQUIDATOR

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D14.  What is a liquidator?

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A liquidator is the person who administers company liquidations. It is a personal appointment – a liquidator may work for a company, such as Dissolve, but they conduct the liquidation in their own name. For a Creditors Voluntary Liquidation, the liquidator must be a Registered/ approved Liquidator. That is, they are registered and supervised by ACRA and you can check out their registration by looking on the ACRA website. Many liquidators are also members of a professional accounting body such as Institute of Singapore Chartered Accountants (ISCA), Insolvency Practice Association of Singapore (IPAS) and also the professional body for insolvency practitioners.

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D15.  What investigations does the liquidator do?

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The liquidator must conduct investigations into the company’s affairs as a result of the Companies Act, Rules & Regulations and Professional Standards.  Usually it will include investigations of the following matters:

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• When the company became insolvent and whether any debts were incurred after that date (that is Insolvent Trading);

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• Whether the directors committed any offences;

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• Whether there are any payments to particular creditors that are preferential and may be recoverable;

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• Whether there are any hidden assets to be recovered or other legal actions to consider.

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D16. How long does a liquidation take?

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There is no set time limit on a liquidation. It will take as long as necessary to complete all matters. That can be as little as six months but may take years. However, provided a director completes the relevant forms and delivers all books and records to a liquidator then the director’s role finishes very quickly.

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