WIND UP PROCEEDINGS
This is a two stage process which forces a debtor to deal with a debt within twenty days of initial service of a statutory demand (step one) or otherwise be deemed insolvent. Once a debtor is deemed insolvent, a creditor is entitled to file proceedings to appoint a liquidator to the company (step two). It should be noted that in most instances a matter will settle within twenty days of the statutory demand being served. Accordingly, it is not always necessary to proceed to step two.
Step 1 - STATUTORY DEMAND
What is a Statutory Demand? The most popular and cost effective method to compel a debtor to pay outstanding money is to issue a statutory demand. A statutory demand is a legal document served upon a debtor which provides them with twenty one days to either:
(i) Pay or settle the debt or secure the debt to your satisfaction; or
(ii) Initiate Court proceedings to set aside the statutory demand by showing that either it has a genuine dispute about the debt, or an offsetting claim.
If there is no action within the twenty one days, the debtor is deemed to be insolvent and formal wind-up action can then commence. This process places tremendous pressure on the debtor to attend to your outstanding amount within twenty one days.
Can I issue a Statutory Demand? In order to issue a statutory demand, there are a number of prerequisites, namely:
- The debtor must be a company;
- The debt must be for a minimum $2,001.00;
- There must be no genuine dispute or offsetting claim against the debt by the debtor; and
- Invoices for the amount claim must have been sent to the debtor.
If you are unsure if your debt can be recovered by using a statutory demand, please contact us to discuss further.
What is involved? Irish Bentley Lawyers will carry out an Australian Securities and Investments Commission (‘ASIC’) search, review all material provided by you and obtain the appropriate instructions, prepare the statutory demand, prepare the supporting affidavit and serve all material on the registered office of the debtor company.
How much does a statutory demand (stage 1) cost? Irish Bentley Lawyers charges a fixed fully-inclusive price of $550.00 (inclusive of GST) for the statutory demand process.
Step 2 – FILING PROCEEDINGS
Why are proceedings necessary? Once a statutory demand has expired, a creditor is entitled to apply to the Court for an Order winding up the debtor company and appointing a liquidator. Only the Court has power to grant these Orders.
What is involved? The following steps are integral to successfully winding up a company:
(a) Obtaining appropriate instructions from you, the client as to your intentions;
(b) Completing an ASIC search;
(c) Preparing an Originating Application to be filed in the Supreme Court;
(d) Preparing supporting affidavit material to be filed in the Supreme Court;
(e) Preparing the appropriate form and notifying ASIC of the wind up action;
(f) Serving copies of the Originating Application and supporting affidavit material on the registered office of the debtor company;
(g) Preparing and publishing a legal notice in a national newspaper;
(h) Preparing and obtaining the consent of a liquidator;
(i) Serving a copy of the liquidators’ consent on the registered office of the debtor company;
(j) Attending the Supreme Court to appear on hearing to obtain the orders (and in some cases – briefing Counsel where appropriate);
(k) Preparing the appropriate form and notifying ASIC of the wind up Orders;
(l) Serving copies of the Orders upon the debtor company; and
(m) Serving copies of the Orders upon the official liquidator.
Once a company is wound up a liquidator takes over all assets of the company. The directors of a liquidated company no longer have control. Any funds left over will be distributed to unsecured creditors after the deduction of costs and secured claims.
What if the debtor company does not have anything? It is common for directors of liquidated companies to make representations such as:
‘If you wind us up, you’ll get nothing.’ OR
‘If you wind us up I won’t be able to get make your money back that I owe.’ OR
‘We don’t have anything anyways, so go ahead and wind us up.’
These statements are in fact incorrect most of the time. Unbeknown to a number of people, the liquidator has power to reverse certain transactions paid out by the debtor. Just because a debtor may have $0.00 in the bank does not mean that a liquidator cannot recover money.
Power to reverse previous transactions of the company The liquidator has power to reverse some of the transactions made by the debtor up to four years prior to the company being wound up. These include:
1. Any transactions made to a relative or related entity of a director or shareholder of the debtor;
2. Any transactions made to any creditor within the past 6 months where the creditor had knowledge that the debtor company was insolvent; and
3. Any unfair loans or preference payments. All money possible is recovered by the liquidator to form a pool of funds of which each creditor of the company (including you) will be entitled to a proportion.
How much does filing proceedings (stage 2) cost? Irish Bentley Lawyers charges a fixed fully-inclusive price of $6,930.00 (inclusive of GST) for the full wind up process. This fee includes:
(i) All professional fees for attending to matters (a) to (m) as listed above;
(ii) Court filing fees;
(iii) Advertising fees;
(iv) Counsels fees (if necessary); and
(v) Miscellaneous outlays.
Please note that you can submit a proof of debt for the recovery of these legal fees once the debtor company is successfully wound up.
What happens if the application to wind the debtor up is defended? The fixed fee quoted in the preceding paragraph includes all negotiations and attendance which arise after service of the originating application and supporting affidavit material. If the application is defended, you will have the option to withdraw it at that stage or to proceed with the defended petition. If you wish to proceed, Irish Bentley Lawyers will discuss fees with you prior to you making this decision.
For more information, please contact Scott Taylor on (07) 3891 3333 or at scott@ihblaw.com .
