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Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:


CALL: (03) 8561 3318

What is Voluntary Liquidation and what is its purpose?

Liquidation is the process of winding up and finalising a company’s affairs. The most common type of insolvent liquidation is a creditors’ voluntary liquidation. This is because it is relatively straight-forward, inexpensive and initiated by the directors and shareholders, usually by way of a creditors vote for liquidation, following:

  • voluntary administration,
  • a terminated deed of company arrangement, or
  • an insolvent company’s shareholders resolve to liquidate the company and appoint a liquidator.

This is in contrast to a member’s voluntary liquidation, which is only available to solvent companies. The primary reason for a liquidator to be appointed to a solvent company is to return capital to shareholders and to finalise the company’s affairs.

Liquidation is conducted pursuant to the Corporations Act 2001 (Cth) and typically involves the appointment of a liquidator (who is independent and readily qualified to undertake the role), who takes control of the company to enable the orderly winding up of the company’s affairs and the legal structure itself.

The role of the liquidator will involve:

  • the collection of assets,
  • the undertaking of investigations, and
  • the distribution of funds to creditors and then to shareholders.

When is Voluntary Liquidation a viable option?

Directors often choose to liquidate a company if they find themselves in the following scenarios:

  • They are unable to pay creditors and wish to relieve themselves of the burden of on-going calls,
  • They are unable to meet their obligations to the Australian Tax Office and risk being issued with director penalty notices,
  • They wish to obtain protection from insolvent trading laws,
  • They wish to bring the company’s affairs to an end,
  • The company has no assets, or insufficient assets to keep doing business, and
  • The company is trading at a loss or has ceased to trade altogether.

What is required of directors?

If a company is placed into liquidation, the responsibility for administering the company shifts to a liquidator. The directors are no longer in control of the company and their powers are suspended.

Directors must do the following:

  • Assist the liquidator by furnishing information about the company’s property, dealings and affairs,
  • Submit a Report on the Company’s Affairs and Property (ROCAP) which describes the financial position of the insolvent company at the date of liquidation,
  • Furnish books and records of the Company to the liquidator, and
  • Provide reasonable assistance, as may be required from time to time, when requested by the liquidator in respect of its investigation.

How is a liquidator appointed?

If a liquidator is to be appointed in a Creditors Voluntary Liquidation and Members Voluntary Liquidation, the following steps are required to be taken:

  • Sign a document of the directors’ resolution,
  • Sign a resolution by the shareholders,
  • Contact an experienced liquidation services provider,
  • The liquidator is to provide the draft minutes of a meeting, and
  • The liquidator receives consent to act as liquidator.

What are the duties of the liquidator?

Generally, a liquidator will be required to carry out the following duties during a company liquidation:

  • Lodge various appointment documents at the Australian Securities & Investments Commission (ASIC),
  • Recommend different government organisations, for instance, the ATO and state government revenue offices, of the appointment,
  • Gather and sell the assets of the company,
  • Set up a creditors report and hold a creditors meeting,
  • Review books, records and reports findings to ASIC,
  • Consider the possibility of instituting recovery activities if it is transpires there are “hidden assets” or assets that ought to be recovered,
  • Pay dividends to creditors if resources are available, and
  • Finalise the company liquidation by completing a final report for creditors, lodge different documents with ASIC and request that ASIC deregisters the company.

How long does the process of Voluntary Liquidation take?

While there is hard and fast rule as to completion of a company liquidation, the process can take as little as 4-6 months in the event that no major issues are identified. The reason why the process takes this time is that liquidators are required to report to various government departments and then await the clearance of these steps to be able to move through to completion.

Sometimes however, a liquidation may take substantially longer but this depends on the complexity of the company and the issues involved, including pursuing any legal claims that may exist.

How can Sharrock Pitman Legal help?

If you are a director of a company and are considering winding it up, you may wish to discuss and explore your options as to liquidation. We have legal practitioners who specialise in and can assist with corporate insolvency and commercial litigation. Please feel free to contact us on 1300 205 506 or by email at litigation@sharrockpitman.com.au.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Written by one of our lawyers

,

.

Lynda Lim

For further information contact

Lynda Lim

Lynda is a Senior Associate of Sharrock Pitman Legal. She is part of our Litgation team. For further information, contact Lynda Lim on her direct line (03) 8561 3330.

More on

Litigation [Courts & Tribunals]

However, in this article we will set out the factors that influence how long it will take to obtain a Grant of Probate and to administer an estate in Victoria.

The basics

First things first: what is a Grant of Probate? A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will. Without Probate, the asset holders (say a bank or share registry) cannot be satisfied as who has the correct authority to receive the deceased's assets and may refuse to pay out.

Sometimes, for smaller estates or if assets are mostly jointly owned with a surviving spouse, asset holders might agree to release payment without requiring a Grant of Probate. This is usually on the basis that the person who receives payment promises to repay (or Indemnify) the asset holder if it turns out they paid to the wrong person.

If there is no Will, then you cannot obtain a Grant of Probate. Instead you obtain Letters of Administration. This is effectively the same, in terms of authorising someone to administer the estate, and would usually be obtained by the person who is the closest next-of-kin to the deceased.

“A Grant of Probate is effectively a document issued by the Supreme Court of Victoria which formally authorises an executor to manage the estate of a deceased person in accordance with their Will.”

Timeframes for Probate in Victoria

In order to obtain a Grant of Probate, the Supreme Court needs to be given information about the assets and liabilities of the estate, the deceased person, the witnesses to the Will, the executors and the Will itself. An advertisement of your intention to apply for Probate must also be published on the Supreme Court website for at least 14 days prior to any application being lodged.

Often, making enquires to obtain all the necessary information can take a number of weeks. Also, you will need the Death Certificate for the application for Grant of Probate and possibly for making proper enquires regarding the assets and liabilities. Waiting for the Death Certificate to issue can therefore add a few more weeks to the process. Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.

The Court itself usually does not take long to process the application (maybe another 1 to 2 weeks) and this is completed using the electronic Supreme Court filing system. This means you do not have to go to a Court hearing. The timeframe for processing applications for Letters of Administration is even less, given that there is no Will document for the Court to consider. There is also a general discretion for the Court to raise a 'Requisition' asking for more information before they review the application - this can sometimes delay matters.

“Overall, if you have your application for Grant of Probate lodged within 1 to 2 months from the date of death, you are making timely progress.”

So, here we are a few months after death and you finally have a Grant of Probate or Letters of Administration. It is important to remember that this is the start of the estate administration and not the end. For a very simple estate, you might only need a further month or so to cash the assets and pay them to the correct beneficiaries. However, it can often be more complex than that. Factors that determine the timeframe to administer the estate include:-

  • Some assets will take time to cash or transfer. For example, if selling a property, final settlement might be 60/90/120 days from the day of sale.
  • There is a 6 month period for challenges to be brought against the estate and executors must wait until this period expires before distributing the estate, if there is any risk that a disgruntled family member might come forward.
  • There might need to be final tax returns for the deceased or for the estate. Failing to wait for the ATO to process these could leave the executor personally liable for a tax bill.
  • You might need to advertise for creditors to come forward and wait for a period of months while this advertising timeframe expires. This protects the executor if they are unsure of all of the deceased's financial dealings and creditors.
  • It might not always be a good time to immediately cash estate assets. For example, the shares just took a nose-dive, do you still sell regardless of available price?

There is a general rule that executors have an 'executor's year' to complete the estate administration. This means that you should be aiming to have the estate finalised and distributed within 12 months from the date of death.

The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.

Liability limited by a scheme approved under Professional Standards Legislation.

Need help with Probate?

Our expert legal team is ready to take your call!

Mitchell is the Managing Principal of Sharrock Pitman Legal. He is an Accredited Specialist in Commercial Law (accredited by the Law Institute of Victoria). He also deals with areas of Employment Law, Wills & Estate Planning and Probate and can answer all your questions related to probate.

For further information, contact Mitchell on his direct line:

DIRECT LINE: 
(03) 8561 3318

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For fifty years Sharrock Pitman Legal has made a significant and long term contribution to meeting the legal needs of business owners and residents in the City of Monash and greater Melbourne area.