You may wish to wind up a business if you’ve come to a juncture in your business life cycle that you no longer wish to maintain the business or the business is no longer viable for you physically or financially.
If your company is solvent (can pay its debts as and when they become due) and does not meet the criteria of deregistering a company, you can dissolve the company through the process of winding up. However, if you meet the following criteria for voluntary deregistration, you can also cease business operation. Voluntary deregistration is available:
- once all company assets have a total value of less than $1000 along with various other criteria like debts being finalised; and
- if the company is solvent.
Voluntary deregistration is usually a cleaner process and is the final step to dissolving the business as all matters have been dealt with before application.
Steps to wind up a business
As the name implies, unlike voluntary deregistration, winding up is the process of finalising all outstanding matters, liquidating all company assets and ceasing all business operations. Thereby closing and dissolving the business.
The following steps are followed to wind up a business or company:
- Company directors declare solvency.
- A special resolution is passed by company members.
- The notice of special resolution is passed on the Published notices website.
The liquidator will then:
- wind up the company’s affairs.
- finish winding up company and lodge the final documents.
Declaration of Solvency
A Declaration of Solvency (ASIC Form) must be made by a majority of Directors. This is a crucial step because the difference between a solvent company and an insolvent company is that a solvent company is likely to be able to pay all debts within 12 months of commencing the winding up process. An insolvent company is not likely to be able to pay all debts.
Forms and further information on the processes for winding up a business can be found on the Australian Investments & Securities Commission (ASIC) website.