What is the role of a liquidator?
The role of a liquidator is to ‘wind up’ a company and bring its operations and affairs to an end.
In order fulfil their duties during company liquidation, liquidators will secure and realise all company assets, make all recoveries, distribute resources to creditors, conduct all relevant investigations into the financial affairs of the company, make distributions to creditors (and distribute any surplus to shareholders), inform both creditors and the Australian Securities and Investments Commission (ASIC) of their actions, and arrange the de-registration of the company.
The role of a liquidator has a number of statutory requirement, including:
- Cause the company’s property to be collected and applied in discharging the company’s liabilities;
- Ensure that the property of the company shall be applied in satisfaction of its liabilities; and
- The directors’ powers cease upon the liquidator’s appointment. The directors are required to assist the liquidator in all matters arising in the liquidation and are to deliver to the liquidator all assets and records of the company.
Liquidators must accept a Report on Company Activities and Property (ROCAP), which must be lodged by the company directors within five days of their appointment in a court liquidation, or within seven days in a creditors voluntary winding up. A ROCAP is a document that details the assets and liabilities of the company at the date of the liquidator’s appointment.
When the liquidation process comes to a close, the role of a liquidator is to report to ASIC and creditors on their findings and apply to deregister the company as the final step.
Key attributes of the liquidator
The liquidator is appointed as a qualified and independent party which creditors rely on to advise them about dividend prospects.
With this responsibility on their shoulders, liquidators are obligated to:
- Act impartially;
- Act with skill and diligence; and
- Avoid placing themselves in a position where personal interests could conflict with professional duties.
A liquidator should realise all assets and discharge all the liabilities, so far as the assets allow. They also need to be aware of any unlawful practices or wrongdoings by officers, former officers or promoters and, so far as the assets allow, proceed to recover any preferences or any damages for which any such persons may be liable.
If their investigation reveals a likelihood that any unlawful business practices took place, the liquidator will investigate (insofar as the assets allow) to see whether officers or former officers have infringed the requirements of the law. The liquidator must report to ASIC if they suspect that anyone connected to the company may have committed an offence.
If the assets available (pending any recovery for misfeasance, etc) do not allow full compliance with the relevant duties, the liquidator should then report the circumstances, an opinion of the likelihood of non-compliance and the reasons for this opinion, to the interested creditors and to ASIC.
Liquidators must also keep sufficient ‘books’ to give a complete and correct record of what they have undertaken and completed for an insolvent company during the process. These books are required for transparency and must be available for inspection by creditors and shareholders.
Such books include details of all receipts and payments during liquidation and minutes of meetings.
Copies of minutes of meetings and detailed lists of receipts and payments, as well as a number of other documents, must also be lodged with ASIC.