Court liquidation appointments have always carried out-of-pocket costs for an appointed liquidator; searches, advertising and internal disbursement charges. That is all regardless of whether there are any monetary recoveries in the liquidation.
The recent introduction by ASIC of its User Pays industry funding model has made some changes in this area, to assist ASIC achieving its self-funding goal. Unfortunately, these changes add further costs onto those that must already be paid by a liquidator.
So, we thought it was an opportune time to display the costs associated with a court liquidation, once the appointment has been made, and the level of due diligence we recommend be undertaken prior to seeking a consent to act from a liquidator.
Costs Associated with Court Liquidations
The table below lists the outlays associated with a typical court liquidation appointment, as well as the disbursement charges.
*Additional levies of $220 will be charged when certain specific events occur that require a lodgement on the Public Notices Website, such as calling a meeting of creditors or declaring a dividend.
As you can see, once a liquidator is appointed to a court liquidation, they will have out-of-pocket expenses of approximately $915. On top of this, the disbursements incurred for photocopying, printing, postage and record storage will likely range between $762.50 and $1,560 depending on the number of creditors and amount of records seized. That’s a whopping $1,677.57 to $2,475 the liquidator needs to fork out regardless of whether there are any realisations. Talk about aligning the liquidator’s interests with that of creditors!
Of course, the above costs are recoverable as a priority in the event of realisations (although at least one levy of $220 is also applied for which we are prevented from passing on, in addition to an annual levy per liquidator of $2,500). However, the reality is that many court liquidations have insufficient realisations to cover all, or in some cases any, of these costs, let alone any remuneration which will have been incurred by the liquidator.
We believe undertaking a thorough level of due diligence prior to going down the winding up path can provide greater insight into the likelihood of recoveries which can meet the above costs (important from the liquidator’s perspective), but also the petitioning creditor costs (important from your client’s perspective).
Recommended Due Diligence Prior to Winding Up
We recommend the following due diligence tasks be undertaken, and made available for review by your chosen liquidator, prior to requesting a consent to act.
Due Diligence Checklist:
- Obtain a company search and PPSR search (PPSR search should be undertaken on the ACN, or in the event a trust is involved with its own ABN, then on the trust’s ABN as well).
- Contact the company/business to verify if it is still trading and from where.
- Obtain a statement of assets and liabilities from the creditor company if a dialogue is open.
- Conduct online searches (eg Google) on the business to check its trading status, scale of business, relevant blogs and other information which may assist.
- Conduct court searches to check whether any other parties are in dispute with the company, or have recently been.
Often, the less information available on a company, the poorer the prospects of winding it up are. If the information you gather indicates the business ceased trading some time ago (three to four months or more) then our experience suggests there may be limited benefit in proceeding with a winding up application unless other compelling information or evidence is available. In this instance, such compelling information or evidence should be presented to your chosen liquidator for consideration.
If you have some doubt about the likely benefit in proceeding with a winding up of a company, it could be worthwhile discussing the circumstances with a liquidator to gauge the prospects, if possible, based on their experience.
For factors that you should consider when selecting a liquidator to consent to act in a court liquidation, see our article, Does Your Choice of Liquidator Even Matter?
Article written by Matthew Bookless, Director.
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