My company is experiencing some financial difficulty at the moment although we are still able to pay our debts. However it’s been a while since we’ve been able to make any drawdowns and I’m not sure it will improve as there’s so much more competition now in our sector. Should I consider putting the company into voluntary liquidation?
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Answer by Kelly Angus, Adelaide 5000 SA
- Directors may ask why they should take the initiative to wind up their company voluntarily rather than wait for a creditor to commence the process but there are in fact several reasons why you may wish to do so.
- A voluntary liquidation generally gives directors a better opportunity to prepare and provides directors better protection from allegations of misconduct.
- Although a voluntary liquidation can be more costly from a director's perspective considering the cost of liquidator's fees, the financial and career consequences to you as a director could be far more costly in the long term if you wait for a creditors’ compulsory liquidation.
- Should you wait for a creditor to make a winding up application you are more likely to face accusations of wrongful or fraudulent trading. These are offences which are punishable by:
- fines;
- personal liability for debts of the company; and
- disqualifications.
- If your company is experiencing financial difficulties you should promptly seek professional legal and accounting advice to learn more about your options and help you to make an informed decision about your company’s future.