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Court Liquidation

Commencement of winding up by the court may be instigated by creditors, directors, shareholders or ASIC. Most Court liquidations are commenced by the creditors of companies and the most common reason for winding up proceedings to be started is the insolvency of the company.

To start the court liquidation process, a creditor will serve a Statutory Demand on the company to pay a debt pursuant to section 459E of the Corporations Act. Failure to comply with the Statutory Demand allows an application to be made to the Court to have the company wound up. At that time, a private practitioner who is an Official Liquidator, is appointed as Liquidator of the company. Upon the appointment of the liquidator the powers of the directors cease and the liquidator takes control of the company.

In most cases, when this form of liquidation takes place, the company has stopped trading. Therefore the liquidator’s role is primarily to investigate the affairs of the company and recover or realise its assets and to distribute the funds to creditors in accordance with the provisions of the Corporations Act.