Voluntary Deregistration -v- Wind ups

Written by Jagroop Kaur Singh

Thinking about shutting down your company? Here’s what you need to know about voluntary deregistration vs wind ups for companies

There are many reasons why you might want to voluntarily close down your company, as opposed to being forced to shut down due to a court-ordered company winding up or other creditor action. If you decide on voluntarily shutting down, you have a few options on how to go about it. Depending on your circumstances, you can deregister your company or wind it up.

So, should I deregister my company or wind it up?

If your company is solvent, which means it can pay its debts as and when they fall due, then voluntary deregistration might be the best option for you. But first, you need to check whether you meet the criteria set out below:

• all members of the company (which means the shareholders) agree to deregister;
• the company is no longer conducting business;
• the company’s assets are worth less than $1,000;
• the company has no outstanding liabilities (for instance, unpaid employee entitlements);
• the company is not involved in any legal proceedings; and
• the company has paid all outstanding fees and penalties payable to the Australian Securities and Investments Commission (ASIC) in accordance the Corporations Act 2001 (Cth). You can find out about outstanding fees and penalties on the ASIC officeholder portal. You will also have to work out if you need to pay an annual review fee to ASIC. If you lodge a deregistration application at least two weeks prior to the due date for the annual review fee, then you don’t need to pay it. If you lodge it outside this two week period, you need to pay the $290 fee to ASIC. You can find out about the annual review fee due date on the ASIC officeholder portal.

If all the criteria above are met, your next step to voluntarily deregister is to complete and lodge an Application for voluntary deregistration of a company, which is known as ASIC Form 6010. There is a $44 fee payable when you lodge this form.

What happens next?

Once your application for voluntary deregistration of a company is accepted, ASIC will publish a notice on its website of the intended deregistration. This is usually done within two weeks of the date you lodge the application. Two months after this notice has been published, the company is deregistered. This means your company will cease to exist and will no longer be a legal entity.

What if my company doesn’t meet the criteria to voluntarily deregister?

Then you have the option to wind up your company instead. You might need to consider this option if, for instance, your company does not meet the criteria set out above because it has assets worth $1,000 or more. The winding up process has a few more steps involved and also requires appointing a liquidator to wind up the company’s affairs. Here’s what you need to do:

1. Pass a special resolution
   After the declaration of solvency has been lodged, the company members must pass a special resolution to wind up the company. Members of the company will need to vote on the special resolution.
2. Make a declaration of solvency
   A declaration of solvency may be made by a majority of the company directors by lodging ASIC Form 520. This declaration means that the directors believe the company will be able to pay all its existing debts in full within 12 months of the commencement of the winding up. There is no fee payable for lodging this form.
3. Notice must be published on the ASIC website
   You must publish a notice of the special resolution on ASIC’s Published notices website by the end of the next business day after a liquidator is appointed.
4. Appointing a liquidator
   A liquidator will need to be appointed to wind up the company’s affairs.
5. More Forms!
   A Notification of resolution (known as ASIC Form 205) will need to be lodged. There is no fee payable to lodge this form.

Is there anything else I need to do?

In addition to attending to the above steps required by ASIC for either a voluntary deregistration or a wind up, there are a number of other items you should tick off yourself. These include the following:

• Collect any outstanding debts the company may be owed and pay off any outstanding company loans if you have them;
• Close any bank accounts in the company’s name;
• Conclude any company leases, like finance or operating leases (for instance, these might be in respect of motor vehicles, plant or equipment);                         
• Terminate any lease agreement for the business premises;           
• Cancel pay as you go (PAYG) withholding registrations;
• Cancel your GST registration and other tax registrations if you have them;            
• Ensure all transfers of company-owned property (if there is any) are registered and that no property is registered in the company’s name;
• Ensure all registered business names held by the company are cancelled or transferred;       
• Ensure any licenses held by the company are cancelled or ceased;            
• Cancel workers compensation and any other insurance;
• Review all company records/registers to ensure all company property is dealt with (for instance, with respect to vehicles, land, shares, trademarks, intellectual property, leases, permits, etc);  
• Ensure all transfers of company property are registered and no property is registered in the company’s name;
• If the company was a trustee, ensure a new trustee has been appointed and no trust property remains registered in the company’s name;      
• Ensure all registered business names held by the company are cancelled or transferred; and
• Ensure any licenses held by the company are cancelled or ceased.

It might feel like an overwhelming and time-consuming process, but it is always recommended that you seek assistance from a lawyer and accountant so they can help guide you through this process. Our team at JHK Legal can assist you with this.