You are a director and shareholder of a Company and the court has just wound up your Company and appointed a liquidator. But this was an administrative oversight and you cannot afford to be associated with a liquidated Company, as it will severely affect your reputation, profession or trade and your ongoing business relationships. Can I unwind a winding up order? How do I do it?
Yes, you can. How? You need to make an application to terminate the winding up of the Company pursuant to section 482 of the Corporations Act 2001 (the “Application”).
In deciding whether to grant a termination of the winding up order, the following considerations have been found by the courts to be relevant. You will need to ensure that these requirements are satisfied to have the best possible chance of having the order granted.
- As a shareholder of the Company you are entitled to apply for the order (creditors can also apply). The court will look at the reasons why you are making the Application and you must make a positive case for the favourable exercise of the court’s discretion.
- You must ensure that no one is unreasonably affected by the granting of the termination order, for example, creditors, the liquidator or other shareholders or directors (if any);
- You must show the court the nature and the extent of the creditors and that all debts of the Company have been discharged. This will include the debts owed to any creditors of the Company, including the petitioning creditor, you, any secured creditors and any other debts not yet known, together with the liquidator’s fees.
- The attitude of the creditors, shareholders and liquidator are important considerations, particularly whether notice of the Application has been given to the liquidator, the petitioning creditor and other creditors and whether the creditors and liquidator consent, or at least do not object, to the termination of the winding up.
- You must show the current trading position and solvency of the Company. This is especially important going forward, for example, showing the solvency of the Company now and in the future. This will normally be provided to the Court by a solvency report prepared by the liquidator. As the liquidator is an officer of the court, significant weight will be put on this document.
- The liquidator will examine your conduct if you are a director of the Company. Accordingly, you must provide a full explanation of any non – compliance by you of your statutory duties and whether the liquidator’s investigations have shown any reason to stop the Company from trading.
- You must provide a satisfactory explanation of the background and circumstances leading to the winding up.
- You must explain any delay in bringing the Application; and
- The court will consider whether granting a termination of the winding up would be consistent with the public interest. For example, it would be contrary to the public interest if, after the termination order had been made, the Company would remain insolvent.
The above requirements are not an exhaustive list. The most significant matter for consideration is the solvency of the Company and whether the Company has returned to, or will soon return to, solvency.
Prospects of Success
With any Court action, there is no guarantee of success. In most cases, the requirements listed above are critical to achieving a positive outcome and if you are able to satisfy these you will generally have good prospects of success. If however, you are unable to, for example, discharge all of the Company’s debts or show solvency prior to the hearing of the Application, then your prospects of success are likely to be reduced.
We have done it !
OpusRed has recently acted for directors in this kind of situation and been granted a termination of a winding up order in the Federal Court, successfully returning the Company to the directors. If you would like a confidential obligation free discussion about your specific requirements and prospects of success of such an Application, please do not hesitate to contact Sam Pandya on 1300 676 787 or firstname.lastname@example.org.