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Topic 9 - Corp Insolvency & Liquidation (Wk 11) - Coggle Diagram
Topic 9
- Corp Insolvency & Liquidation (Wk 11)
Process of liquidation
Is the process that leads to the end of the company
an appointed liquidator sells the company assets
distributes the proceeds to the company creditors
any surplus funds are distributed to the members
Types of winding up:
Voluntary
by members (if the company has served its purpose or to distribute the value to its members)
by creditors (if the company has been through administration)
Compulsory
ordered by the court
Duties of a liquidator
Is an "officer" and owes fiduciary and statutory duties to the company
Powers of the liquidator
Assets or compensation recovered
Voidable antecedent transactions
Unfair preferences
s588FA
void if entered into 6 months ending on relation back day
if related entity, voidable for 4 years prior to relation back day
if to defeat, delay or interfere with creditor rights, voidable for 10 years prior to relation back day
Uncommercial transactions
s588FB
voidable for 2 years ending on relation back day
or 4 years if involving a related entity
10 years if intended to defeat, delay or interfere with creditor rights
Transactions to defeat creditors
s588FE
Unfair loan
s588FD
Unreasonable director-related transaction
s588FDA
void 4 years prior to relation back day
Defences
s588FG
in good faith
no reasonable grounds for suspecting insolvency
a reasonable person would not have suspected insolvency
the person provided valuable consideration
does not apply to unfair loans or unreasonable director related transactions
Distribution of funds and deregistration
Creditors must demonstrate to the liquidator that they are owed money by lodging a proof of debt form
Liquidator must distribute funds in the following order:
secured creditors in relation to non-circulating assets
preferential creditors
s556
, including liquidators costs and employee entitlements
secured creditors in relation to circulating assets
unsecured creditors
members
After all amounts are distributed, the company must be deregistered with ASIC under
s601AD(1)
and then the company ceases to exist
Directors and officers remain liable for things done while the company existed
ASIC can reinstate a deregistered company
'Phoenixing' of companies
Is created by unscrupulous directors who wish to keep operating despite their company being insolvent
Designed to cheat the company's creditors and breach
s588G
and
s181(1)(a)