There are many reasons why a liquidation may be terminated and control returned to the company’s directors. These include director error liquidating a holding company, retrieving tax losses associated with that particular company or retrieving an asset registered in that company name, or failure to respond to a Creditor’s Statutory Demand. This is particularly common in voluntary liquidations, where there are a group of related companies and / or corporate trustees involved.
The Court’s power to terminate a liquidation and return the company back to the directors is found at section 482 of the Corporations Act 2001.
Whilst ASIC has a limited power to reinstate deregistered companies that have been deregistered through an administrative error, ASIC does not have the power to terminate any company liquidations.
In order to terminate a liquidation, the Court requires the termination application to show that the company is in fact solvent, with:
- payment being made to all creditors and the liquidator fees;
- shareholders approving the termination application; and
- ASIC being notified.
The Court will require a solvency report in support of the application to terminate a liquidation.
If the reason for the liquidation was a result of the failure of the company to attend the wind up application hearing, a solvency report will not be required, as long as the above matters have been attended to, with a supporting affidavit from the liquidator and directors.
In the event of a voluntary liquidation where the directors or members have resolved to place the company into liquidation pursuant to section 491 of the Corporations Act, an application to terminate the liquidation and return the company to the control of the directors can still be achieved through section 482 of the Corporations Act and section 90-15 of Schedule 2 (Insolvency Practice Schedule) of the Corporations Act (formerly section 511).
Again, a supporting affidavit from the appointed liquidator and directors will be required, with:
- shareholder consent;
- ASIC notification; and
- the reason for the termination application being made.