Winding Up a Company? 4 Urgent Steps - Sunshine Coast Lawyers

Are you a company owner that is considering winding up your company, but is worried that you don’t know enough?

This is a completely valid concern as winding up a company is a big step and can have some negative effects if you do not properly consider the potential outcomes of such a step.

If this is currently the case for you, you are probably feeling quite anxious and worried that the process will not go the way that you wish it to.

In case you are just beginning to look into the process and are unsure of what it is, winding up or liquidating is the process of closing up a company through the distribution of its assets to creditors.

The most common reason that someone would choose to liquidate is due to financial struggle, but any company can wind up if they wish.

In this article our Sunshine Coast Insolvency Lawyers will discuss the process of winding up a company, why you would do so, and the steps that you should take when liquidating to best avoid running into trouble.

Do you want to know how to wind up a company? Be referred to the best insolvency lawyers on the Sunshine Coast

Why Would I Wind Up a Company?

Before we discuss the steps that you should take to ensure that the liquidation process is smooth sailing, it is important that you understand why you would wind up your company in the first place. Liquidation may be the best option for your company if:

Your company is small: One reason that you may choose to wind up your company is if it is considered to be a small company. Small companies can benefit from the liquidation process as several other methods that they may choose will usually be too expensive for such a small company and are better suited to large companies.
You’ve run out of money: Another reason that your company may benefit from winding up is if it has run out of money. This is the more common reason that a company chooses to wind up, but if you can’t pay your debts then chances are it is time to pack up shop.
You’re trading at a loss: Another reason that you may choose to wind up your company is if you are trading at a loss. This means that you are putting more money into the company than you are making from it. Even if you have not run out of money yet, chances are you will soon, and it is best to wind up before you are forced to.
You have no assets: Another reason that you may choose to liquidate your company is if you have no assets or very few. This means that there will be little to lose from the process of winding up as you do not have to worry about the liquidators taking too much of your money into assets.

What Steps Should I Take Winding Up a Company?

There are number of steps that you can take before winding up a company on the Sunshine Coast, including:

Let People Know
Notify Your Customers
Sell Your Company Assets
Make Important Payments

We will explain each of these in more detail below.

Let People Know You’re Winding Up a Company

The first thing that you should do before you even begin the process of winding up your company is to let all of the people important to your company know.

Nobody enjoys a surprise loss of employment. In the same way, no one likes suddenly losing a customer with little to no warning.

It is important that when you are liquidating that you do not burn bridges with your good employees and suppliers, especially if you don’t think that this company will be your last or you currently have one or more other companies.

If you still owe your employees any benefits, such as holiday pay or superannuation, make sure this is provided before you liquidate.

Your suppliers may also still need to bill you for past expenses, so make sure you give them the opportunity to do so to stay out of legal trouble.

Notify Your Customers

Another thing that you should do when you are beginning to liquidate your company is to notify your customers.

Customers can create and destroy a company.

They are the backbone of any company and can help you to grow and expand.

Make sure that they are aware that you are about to liquidate when you wish to do so.

This is especially important if you are a company that provides to other companies or if you provide a product or service to a client on a regular basis.

This way, your clients will have the time to find a new provider before you suddenly shut down.

Sell Your Company Assets

Another important step that you should take when you are winding up your company is to sell all of the company assets.

When they are liquidating, most company owners will think to sell off all of the company inventory and call it a day.

However, there is more to it than that! If your company owns any vehicles, office or other furniture, machinery, tools, or any other thing that you could sell, sell it!

This will make the entire liquidation process much smoother and easier for you.

Note – care should be taken so a director does not fall foul of the Corporations Act. Best to seek legal advice before selling company assets.

Make Important Payments

Another important step that you should take when you are winding up your company is to make all of your important payments.

The most important payments for a company owner to make before liquidating their company are called liabilities and must be paid.

If you do not make such payments, you can become personally liable for them or your company can get into legal trouble, both of which are to be avoided.

Becoming personally liable for a company expense is particularly bad as it means that you may face personal insolvency which can have effects on your personal life and financial future!

Winding Up a Company – Key Takeaways

Winding up a company can be a difficult task.

For this reason, it is important that you know what steps you should be taking and seek help when you deem it appropriate.

This way, the winding up of your company can go as best as it can for you, and you can avoid it causing personal issues!

Consider seeking the help of a lawyer to give you professional advice about the matter and help to guide you through the process.