Closing Your Business
August 7, 2012
Here is everything you need to know about closing your business.
If your organisation is unable to settle its business-related debts and you haven’t been able to reach an agreement with your creditors, then you may voluntarily file for bankruptcy at the Insolvency and Trustee Service Australia, the government agency that handles the administration and regulation of the personal insolvency system in the country.
Before filing for bankruptcy, however, you need to read ITSA’s Personal Insolvency Information for Debtors document, which provides alternatives to bankruptcy and details the effects of bankruptcy.
Documents required in filing for bankruptcy
Present the following documents to the ITSA:
- A debtor’s petition.
- A statement of your financial situation.
- A signed acknowledgement that you've read ITSA's Prescribed Information document.
Deregistering a company
You can deregister a company if the following conditions are met:
- The company isn't conducting any business.
- All the members of the company agree to deregister.
- The company's assets are worth less than AU$1,000.
- The company has settled all payable fees and penalties under the Corporations Act.
- The company isn't a participant in any legal proceeding.
- The company has no outstanding liabilities.
How to deregister a company
There are mainly two ways to proceed:
- On the condition that you meet certain legal requirements, you can deregister a company by applying directly at the Australian Securities & Investments Commission.
- You can also deregister through a liquidation initiated by your company's members and includes the orderly selling of all assets, paying off creditors, distributing remaining assets and dissolving the company.
To find out which option is more suitable for your company, consult an independent professional. Take note that you and your company’s directors must keep all necessary financial documentation for three years after deregistration.
Winding up a solvent company
If for some reason your company is unable to deregister, you may decide to wind up or liquidate your company under s491 of the Corporations Act 2001.
To begin the voluntary liquidation, the majority of the company’s directors need to make a written declaration that they’ve inquired about the company’s affairs and that at a directors’ meeting, they have agreed that the organisation will be able to pay its debts completely in 12 months after the start of the liquidation. This is usually called the declaration of solvency.
If a director makes a declaration of solvency but is later discovered that there are no reasonable grounds for the declaration, the director will be penalised with a AU$5,500 fine, a year in jail or both.
The main advantage of a voluntary liquidation by a company’s members is that they can choose the liquidator in charge, determine the liquidator’s compensation and generally supervise the person’s conduct.
If the company is proprietary, a person not registered as a company liquidator can still carry out the winding up.
Forms required for voluntary liquidation
- Form 520 Declaration of solvency
File this form before the date when notices of the meeting where the special resolution for the company's liquidation are sent out. The resolution needs to be approved five weeks after the date of making the solvency declaration.
- Form 205 Notification of resolution
File this within seven days after passing the resolution. This document has to come with a printed copy of the resolution.
- Form 505 Notification of appointment or cessation of an external administrator
File this within 14 days after appointment.
- Form 524 Presentation of accounts and statements
File this within a month after the first six-month period from the date of the liquidator's appointment and every six months afterwards.
- Form 523 Notification of final meeting convened by liquidator
File this form within seven days after the final meeting. Include with a copy of the document detailing how the liquidation was conducted.
Cancelling a business name
If you no longer need your business name due to your company’s closure, you may file the necessary forms with the Australian Securities and Investments Commission, or ASIC. Don’t forget to bring your ASIC key when you do so.
Cancelling a business name takes at least 28 days. After ASIC receives your request to cancel, the agency will provide you or any other representative included in the business names register a 28-day notice that ASIC will cancel the business name. This is done to guarantee that all relevant parties are informed of the request to cancel the business name and avert unauthorised attempts to cancel a business name.