Members’ Voluntary Liquidations

The shareholders of a solvent company may decide to wind up the company by way of a members’ voluntary liquidation.

To commence a members’ voluntary liquidation, the majority of a company’s directors must resolve that the company will be solvent (that is able to pay its debts in full) within 12 months after the commencement of the liquidation. This resolution is commonly referred to as a declaration of solvency.

Once a company’s directors have made the declaration of solvency, the company’s members may wind up the company by way of a members’ voluntary liquidation by passing a special resolution at a meeting of members that the company be wound up in this manner. The company’s members must be given at least 21 days’ notice in writing of the meeting and for a special resolution to be passed at least 75% members entitled to vote and present at the meeting must vote in favour of the resolution.

The winding up of the company will commence upon the making of the special resolution by members.

The role of the liquidator is to:

• Realise the company’s assets;
• Pay the company’s liabilities;
• Ensure the company’s tax lodgement and payment obligations are discharged;
• Make a distribution to the company’s shareholders of any surplus funds.

Winding up a solvent company through this process may have the following benefits to the company’s directors and shareholders:

• It avoids the directors taking the responsibility of attending to the finalisation of the company’s affairs themselves given it can be a legalistic and time consuming process;
• It can provide tax benefits to the company’s shareholders. For example distribution of a company’s paid up share capital and pre-CGT reserves may be distributed to members tax free.
• It is a more formal procedure to end a company’s affairs, particularly where they company is unable to be voluntarily deregistered (ASIC has strict criteria as to when a company is able to be voluntarily deregistered);

Pearce & Heers has conducted many members’ voluntary liquidations and can provide advice and assistance to a company’s accountant, directors and members in carrying out the process. We generally provide this service for a fixed fee except in the most complicated matters.

If you wish to obtain advice regarding members’ voluntary liquidations, or appoint any of the qualified staff members of Pearce & Heers as liquidator of a members’ voluntary liquidation please contact our Brisbane or Gold Coast office.