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    Rules for liquidating a company

    All profits are owned by the business, and in most cases; all debt is owed by the business.An insolvent limited company can move to place itself into voluntary liquidation to avoid having creditors petition to force a court ordered liquidation.The liquidator’s role is to: Except for lodging documents and reports required under the Corporations Act, a liquidator is not required to do any work unless there are enough assets to pay their costs.If the company is without sufficient assets, one or more creditors may agree to reimburse a liquidator’s costs and expenses of taking action to recover further assets for the benefit of creditors.It is important to understand that there is no general prohibition on directors starting out again, even with an essentially identical business.

    They must also lodge a Notification of appointment or cessation of an external administrator (Form 505) to advise of a liquidator's appointment.Our clients sometimes express frustration and disbelief when directors of insolvent companies form new companies, often trading as normal, especially when these new companies then also fail.A frequent question is along the lines of "surely this can't be legal? In this short article we seek to clarify the law in this complex area.It is an offence under the Corporations Act 2001 to make a false declaration of solvency. If you believe that a company is insolvent, see Winding up an insolvent company.After the solvency declaration has been lodged, the company members must make a special resolution to wind up the company.

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