Winding up a solvent company

Winding up a company may be an option if it doesn't meet the requirements for voluntary deregistration (a company with assets worth $1,000 or more cannot be deregistered on request). 

Winding up is a process where a company's outstanding matters are finalised, its assets liquidated, and it ceases to exist as a company.

Steps to winding up a solvent company

Step 1 – Company directors must make a declaration of solvency

To begin winding up a solvent company, a majority of the directors must make a Declaration of solvency (Form 520). This means they believe the company will be able to pay all its existing debts in full within 12 months of the commencement of the winding up.

Form 520 must be made and lodged with ASIC. This must be done before the date on which the notice of meeting (see Step 2 below) is sent to members to consider the resolution to wind up the company.

It is an offence under the Corporations Act 2001 to make a false declaration of solvency. Penalties can apply. If you believe that a company is insolvent, see Winding up an insolvent company.

Step 2 – Company members must pass a special resolution

After the solvency declaration has been lodged, the company members must pass a special resolution to wind up the company.

All members must have at least 21 days notice (in writing) of the meeting to vote on the special resolution, although this can be reduced by agreement. At the meeting, at least 75% of company members must be in favour of the resolution for it to pass. The company must also appoint a liquidator or liquidators, and the winding up begins from the date the special resolution is passed.

The company must lodge Form 205 Notification of resolution setting out the text of the resolution that was passed and the liquidator must lodge Form 505 Notification of appointment or cessation of an external administrator to advise of their appointment.

Step 3 – Notice of the special resolution must be published on the Published notices website

Notice of the resolution to wind up the company must be published on ASIC's Published notices website by the end of the next business day after the liquidator is appointed. You will need to sign up to the website and pay the appropriate fee before you can publish a notice.

For more information on how to publish a notice, see the Published notices website.

Step 4 – Liquidator winds up company's affairs

The liquidator can then begin winding up the company. They must lodge with ASIC a detailed list of receipts and payments for the administration (Form 5602 Annual Administration Return) annually on the anniversary of their appointment.

If the liquidation commenced before 1 September 2017, the liquidator will continue to lodge the six-monthly Form 524 Presentation of accounts and statement until the six-month period ending on the first anniversary of their appointment date. Thereafter, they will lodge the annual administration return.

At any point, if the liquidator thinks the company will be unable to pay their debts in full within 12 months, they must either:

• convene a meeting of creditors
• appoint a voluntary administrator
• apply to the court for the company to be wound up in insolvency.

Step 5 – Liquidator finishes winding up company and lodges final documents

If the liquidator has finished winding up the company before 1 July 2018, they need to lodge Form 523 Notification of final meeting convened by liquidators within seven days of the company's final meeting. It must include an account of how the winding up was conducted.

The liquidator must also lodge a:

• Form 5603 End of administration return
• Form 5011 Copy of minutes of meeting.

If the winding up finished on or after 1 July 2018, the liquidator is not required to convene a final meeting but must lodge Form 5603 End of administration return within one month after the end of the winding up.
The company will be deregistered three months after the Form 523 or Form 5603 has been lodged.

Court involvement

A member or creditor can ask the court to review any part of the winding up. This includes appointment of a liquidator, a liquidator's payment, or other issues that arise.

Important notice

Please note that this information sheet is a summary giving you basic information about a particular topic. It does not cover the whole of the relevant law regarding that topic, and it is not a substitute for professional advice. We encourage you to seek your own professional advice to find out how the applicable laws apply to you, as it is your responsibility to determine your obligations.

You should also note that because this information sheet avoids legal language wherever possible, it might include some generalisations about the application of the law. Some provisions of the law referred to have exceptions or important qualifications. In most cases, your particular circumstances must be taken into account when determining how the law applies to you.