Provisional and Official Liquidation
The appointment of a Provisional Liquidator can occur when there is dispute between a company's shareholders and the company urgently needs a liquidator appointed where the value of a company's assets are likely to be dissipated.
A Provisional Liquidator is appointed to a company by the Court in the period between:
- when an application for the winding up of the company is filed; and
- when the application is heard by the Court.
The appointment is 'provisional' because it may be reversed if the company is not wound up at that hearing, or if another liquidator is appointed to the company at that hearing.
A Court must be convinced that the assets of the company are in danger of being dissipated for the appointment to occur. The most common reasons for Provisional Liquidation include the following:
- there is a dispute between the shareholders; or
- the company is insolvent and needs an external administrator appointed immediately.
The main function of the Provisional Liquidator is the preservation and control of the affairs and assets of the company pending the hearing of the winding up application.
Court liquidation (previously known as Official liquidation) occurs when a Court appoints an independent liquidator to be responsible for the realisation of a company's assets. This is usually due to a company failing to meet a statutory demand by an unsecured creditor.
Role of Court Liquidator:
- collect, protect and realise the company's assets;
- investigate and report to creditors about the company's affairs, including any unfair preferences which may be recoverable, any uncommercial transactions which may be set aside, and any possible claims against the company's officers;
- enquire into the failure of the company and possible offences by people involved with the company, and report to ASIC;
- after payment of the costs of the liquidation, and subject to the rights of any secured creditor, distribute the proceeds of realisation; and
- apply for deregistration of the company on completion of the liquidation.
If you would like to discuss our specialist Business Recovery and Insolvency services and how we might be able to assist you, please phone our Sydney office (02) 8346 6000, Melbourne office (03) 9679 2222, Adelaide (08) 8373 5588 or Newcastle office on (02) 4962 2688.