Members’ Voluntary Liquidation

The process for initiating a members’ voluntary liquidation is as follows:

• a meeting of the company’s directors is held to approve a Declaration of Solvency.  The Declaration of Solvency sets out the company’s assets and liabilities along with the directors’ statement that the company is able to pay all of its debts within 12 months.  A copy of the Declaration of Solvency is filed at the Australian Securities and Investments Commission (“ASIC”), before the notices of the meeting are sent to the shareholders;
• assuming that the consent to short notice provisions in the Corporations Act are satisfied, a meeting of shareholders can usually be held the day after the Declaration of Solvency is lodged with ASIC.  If shareholders do not consent to short notice of the meeting, then 21 days notice must be provided; and,
• at the shareholders’ meeting it is resolved that the company be wound up and a Liquidator appointed.  There is no requirement to appoint a Registered Liquidator.

The role of the Liquidator in a members’ voluntary liquidation, is as follows:

• to realise the assets of the company;
• to pay creditors’ claims, if any; and,
• to distribute the surplus company assets to the shareholders, in accordance with the company’s memorandum of association or constitution.

Prior to distributing the assets to shareholders, the Liquidator will obtain a tax clearance letter from the Australian Taxation Office.

If it becomes apparent to the Liquidator that the company is insolvent, the liquidation may transition to a creditors’ voluntary liquidation.

A members’ voluntary liquidation may be appropriate:

• when, because of risk management issues, the directors wish to have an independent Liquidator distribute the company’s assets to shareholders; or,
• in some circumstances, there are tax benefits available to shareholders in a liquidation, which would not otherwise be available to the shareholders.