In the case of individuals, debt that cannot be repaid is dealt with by declaring a bankruptcy. But when a company cannot pay off its debts, it goes into liquidation. The company becomes insolvent and cannot continue to operate. Corporate liquidation is the process of winding up an insolvent company.

The Process of Corporate Liquidation:

The process begins with a liquidator being appointed either by the shareholders or by a court. The liquidator converts the company's assets into cash. The funds are then used to pay off the liabilities and settle the debts of the company. If any funds are left over, these are distributed among the shareholders according to the company's bye-laws as per the Companies Act. After that, the company is dissolved.

Implications of Appointment of a Liquidator:

• The liquidator stands for the interest of the creditors. Once a liquidator is appointed, the company will stop operating and the directors’ powers come to an end.
• Appointment of a liquidator also prevents the company from disposing off its assets – the realisation or selling of the assets will be conducted by the liquidator.
• In some cases, the company may continue to function for the sole purpose of the liquidation process.
• The employees of the company will be served a formal notice for dismissal.
• Creditors cannot pursue legal action once a liquidator is appointed. They must address their claims to the liquidator.

Distribution of the Company's Assets:

There is an order in which the realised assets will be distributed among the creditors. Secured creditors who have a claim over property/assets of the company for the debt/loan have the first right. In fact, they will take over the particular asset in settlement of the debt.

After settlement of secured creditors the remaining debts are settled in the following order:
• Liquidation expenses, charges and fees
• Employees’ wages
• Unsecured creditors if any
• Interest due on any debts or loans
• Dividends and profits to shareholders.

When it comes to corporate liquidation and Liquidation Specialists Sydney, Australia, the fees charged will depend on several factors such as:
• The quantum of the debt
• The assets at the company's disposal
• The number of creditors involved
• what is the company's trading status
• The number of employees in the company.

Obviously, since the company has reached the point of liquidation, it cannot afford to pay a huge amount of fees and the shareholders will look for cost effective Registered Liquidator Sydney, Australia. At DCL Advisory we have the knowledge and the experience to guide you in these matters in a cost effective way. Visit us at http://www.voluntaryadministrationexperts.com.au/ or contact us for assistance.