Winding Up

The team at Meyer Vandenberg is here to help with all your legal issues arising in relation to the winding up of insolvent companies, whether the winding up be voluntary or involuntary.

Our extensive experience includes working with creditors, debtor companies, directors of debtor companies and insolvency practitioners.

If you are a creditor owed a debt by a company, we can guide you through the relevant considerations and strategies to recover the debt using the Corporations Act 2001 (Cth), for example issuing a Creditors Statutory Demand.

If you are a director of a debtor company that has been served with a Statutory Demand, we can advise you about the company’s options to deal with the Demand, including making an application to a court to have the Demand set aside. We can also advise you about voluntarily putting the company under external administration.

If winding up proceedings have already commenced against your company, we can advise you about the company’s options to deal with the winding up application, including making an application to a court to have the winding up application dismissed.

If you are an insolvency practitioner, we can act to protect your rights and help you meet your obligations arising under corporations law and relevant codes of conduct, and assist you recover assets to the insolvent company for distribution to creditors.

What we can do

In every case we:

  • Take the time to properly understand the facts, evidence and surrounding circumstances of your situation.
  • Consider your legal position based on the current state of relevant law, and determine the best strategy to protect your interests.
  • Deliver advice in plain-English about your legal position, options for the next steps and our recommendations tailored to your situation and based on our expertise.
  • Negotiate at any time with the other parties to resolve as quickly as possible the issues between them, whether the negotiation be formally by mediation or informally by communications between the parties (and their lawyers).

We can also, as required:

  • Prepare and run court proceedings (litigation) for you, including appeals.
  • Prepare and help you execute documents recording and giving effect to settlement reached between the parties or court orders.

Winding up as relates to creditors

  • Prepare Creditors Statutory Demands for payment of debts.
  • Prepare winding up applications to a court.
  • Prepare Proofs of Debt.
  • Negotiate and liaise with the insolvency practitioner appointed to the debtor company about your debt.
  • Negotiate and liaise with the insolvency practitioner appointed to the debtor company to resolve any dispute or claim arising from your dealings with the company.

Winding up as relates to debtor companies

  • Negotiate and liaise with your creditors or insolvency practitioner about your debts and issues arising in your insolvency.
  • Prepare applications to set aside a Statutory Demand.
  • Prepare applications to adjourn or dismiss a winding up application.

Winding up as relates to directors of debtor companies

  • Advise you of your obligations as a director of an insolvent, or about to be insolvent company, and the various forms of external administration.
  • Advise you of options to deal with the company’s insolvency or impending insolvency, including the “safe harbour” regime, restructuring and turnaround.
  • Negotiate and liaise with your creditors or insolvency practitioner about the company’s debts.
  • Negotiate and liaise with the insolvency practitioner appointed to your company to resolve any dispute or claim arising from your conduct as a director of the company.

Winding up as relates to insolvency practitioners

  • Advise you about legal issues arising under your appointment, including powers and duties under corporations law, voidable transactions and other claims of the company, competing security and other proprietary interests, and distribution of funds from assets realised for creditors.
  • Assist you recover assets, debts or other compensation owed to the company.
  • Negotiate, prepare and implement deeds of agreement or sale of assets.
  • Prepare applications for declarations and consequent orders under Part 5.7B of the Corporations Act 2001 (Cth).
  • Prepare applications for court directions, including as relates to remuneration and release.
  • Prepare deeds of company arrangement.
  • Prepare applications for appointment as trustee of assets.

The MV difference

  • Experts in corporate insolvency law who work for creditors, debtors, directors and insolvency practitioners, and who have a thorough knowledge of each party’s powers, duties and entitlements.
  • A commitment to protecting your interests having regard to both legal and non-legal interests.
  • A focus on practical and plain-English advice, with commercial recommendations to resolve issues.
  • A commitment to collaboration with other parties to determine and implement the best strategy to protect your interests, ensure all rights and obligations are recognised and resolve any dispute.
  • True passion for this area of law.
  • Strong and deep connections with local insolvency practitioners, which enables candid and productive discussions to resolve issues and achieve optimal outcomes for all parties.
  • Frank and fearless advice to you about the strength of your legal position, or the likely outcome of the dispute.
  • Full and frank disclosure of all legal costs to ensure a properly informed decision about the next steps is made and there are no unhappy legal costs surprises along the way.

FAQs

A Statutory Demand is a document issued under the Corporations Act 2001 (Cth) to a company by a creditor demanding payment of a debt greater than $2,000. The debt must be due and payable at the date the demand is served on the company. The Statutory Demand requires the company to pay or secure or compound payment of the amount claimed in the demand within 21 days of the demand being served on the company.

If the company does not comply with the Statutory Demand or file and serve an application to set it aside within 21 days, then the company is presumed to be insolvent. Following a failure by a company to comply with a Statutory Demand, the creditor who served the demand has three months within which it is allowed to rely on the presumption of insolvency and make an application to the court to wind up the company and appoint a liquidator.

A company that has been served with a Statutory Demand can make an application to the court to have the demand set aside if there is a genuine dispute about either the amount or existence of the debt on which the demand is based, the company has a counter-claim or set-off against the creditor that is equal to or greater than the amount in the demand, the demand is defective such that it will cause substantial injustice unless the demand is set aside or there is ‘some other (good) reason’ why the demand should be set aside.

Examples of when the court has set aside a Statutory Demand for ‘some other reason’ includes where there is a failure to serve a supporting affidavit with the demand or where the affidavit in support fails to verify the amount of the debt, or that the debt is due and owing by the company.

In the case of court-ordered liquidations, a liquidator is appointed by the court as an officer of the company and essentially takes control of the company. When a company is being liquidated because it is insolvent, the liquidator has a duty to all of the company’s creditors. The liquidator will undertake investigations into the company’s affairs and will report to creditors. These investigations can date back a number of years in order to ascertain whether or not any unfair preferences may be recoverable, any uncommercial transactions may be set aside, and if there may be any possible claims against the company’s officers. The liquidator will also inquire into the failure of the company and possible offences by people involved with the company and then report to the Australian Securities and Investments Commission (ASIC).

The liquidator will recover property and assets of the company and after payment of the costs of the liquidation, and subject to the rights of any secured creditors, will distribute the proceeds of any realisations. Distributions will be made to priority creditors first, including employees, and then to the rest of the unsecured creditors in proportion to their proved debts.

A Proof of Debt is a document which allows an unsecured creditor to lodge a claim against the company for payment of the total debt amount owing to the creditor, potentially including legal costs and interest. It is also the necessary first step for a creditor to participate and vote at a meeting of creditors or to receive a distribution. Before a creditor is allowed to vote at a meeting of creditors or a dividend is paid, the liquidator must adjudicate on the Proof of Debt and decide whether to admit or reject it. To ensure the Proof of Debt is accepted it must be clearly drafted and it is best practice to substantiate the claim by annexing supporting documents.