A Guide to Deregistering a Company
If your company is no longer trading or is dormant it is still registered with ASIC. This means that it is required to meet its legal obligations which include keeping financial records, lodging financial reports and making the annual review fee payment. For companies that meet the criteria, voluntary deregistration is the most effective and cost-efficient way to shut down a company so that you no longer have to fulfil your responsibilities.
As corporate insolvency experts with a wealth of industry experience, our team has compiled detailed answers to a list of the most frequently asked questions. They will help you understand the process of deregistering a company, the effect of company deregistration and any associated costs involved.
What happens when you deregister a company?
When a company is deregistered, it no longer exists. It cannot conduct any trading activity and is no longer recognised as a separate legal entity. Once an application for deregistration is approved ASIC will make it known to the public via the Published notices website. A company is officially deregistered two months after the application has been received and it is at this stage that any company assets will vest in ASIC. This highlights how important it is to take the necessary steps when deregistering a company.
Why would you deregister a company?
There are numerous reasons to consider deregistering a company and they are not limited to companies which are no longer trading. There are situations across various stages of the business cycle where deregistration is a suitable option. The following may apply:
Not Trading: The most common reason for deregistering a company is that it is no longer trading or dormant.
Members Agreement: The shareholders of a company agree on company deregistration. This may be due to poor financial performance or the decision to pursue other interests.
Retirement: There are instances where the sole or major shareholder of a company is retiring and there is no succession plan. A lack of assets or inability to sell may lead to the decision to deregister the company.
Merger/Takeover: A merger or acquisition often leads to the formation of a new company or one company absolving the other. As a result, one or more of the companies involved will no longer be actively trading and can be deregistered.
What are the criteria for voluntarily deregistering a company?
The criteria for voluntary company deregistration are specifically outlined in section 601AA of the Corporations Act 2001 (Cth). As per legislation, deregistering a company is only possible if:
- all the members of the company agree
- the company is not trading
- company assets total no more than $1,000
- any outstanding fees or penalties have been paid
- there are no liabilities, and
- the company is not a party to any legal proceedings.
This application can be made by the company, a director of the company, or a liquidator. In the case of liquidation, one of the final tasks of a liquidator is to submit the application for company deregistration.
Can ASIC deregister a company?
As the financial regulator, ASIC is provided with a range of powers which includes the ability to deregister a company. ASIC may deregister a company if:
- The company has not paid its annual review fee, and more than a year has passed since it was due
- ASIC believes the company is no longer trading as no documents have been lodged for a period of 18 or more months
- The company has not responded to compliance notices such as a wind-up notice or strike-off action.
If you have received a wind-up notice, it is essential to act within the allotted time frame. A failure to do so may result in the company being placed into liquidation and subsequently deregistered by ASIC. Moreover, Directors may be held personally liable for company debts.
How much does it cost to deregister a business?
As already mentioned, to be able to apply for voluntary deregistration you must first complete payment of any outstanding fees. This includes the annual review fee which as of 1 July 2021 is $276 for a proprietary company. If your application is made more than two weeks prior to the due date of the annual review fee, the payment will not need to be made.
Once any outstanding payments have been made and the criteria is met, you simply need to lodge a 6010 form – application for voluntary deregistration of a company which costs $42.
What is the process to deregister a company?
When undertaking the process of deregistering a company, ASIC recommends that you take the following steps:
- Ensure that all outstanding fees and payments have been made
- Make sure that you meet the eligibility criteria
- Close all bank accounts in the company’s name
- All company assets (property, motor vehicles, equipment, trademarks etc) has been dealt with accordingly and is no longer registered in the company’s name
- Cancel or transfer all registered business names held by the company
- Cancel any licences, subscriptions etc held by the company
- Complete and lodge a 6010 form
If your application is approved, the pending deregistration will be listed on the Published notices website and the company officially deregistered two months after this.
What happens to property owned by a deregistered company?
Once a company is deregistered, any company assets such as property vest in the regulator – ASIC. This means that only ASIC will have the power to deal with any property that has not been distributed. If you are in the process of deregistering a company it is vital that all assets including property are dealt with prior to lodging an application.
Can you deregister a company with liabilities?
An application for voluntary deregistration of a company will be rejected if it is found that the company has any outstanding liabilities or debt. Furthermore, you cannot voluntarily deregister a company that is insolvent. If your company is insolvent, you will have to consider other insolvency options such as administration or liquidation.
Should I deregister or liquidate?
The decision to voluntarily deregister a company or consider alternative options such as liquidation will depend on several factors. We have already touched on the fact that voluntary deregistration is limited to solvent companies that meet a strict criteria. Voluntary deregistration is suitable for smaller companies who have a small number of assets and/or liabilities that can be managed without the need of an insolvency professional such as a liquidator.
As there are ramifications for failing to carry out your legal obligations as a Director, it is common for Directors to seek professional assistance prior to making any decisions. This also gives Directors the confidence that the company affairs have been properly wound up and all legal processes dealt with accordingly. The following can be used as a basic guide when making a decision:
- Voluntary Deregistration: Solvent small company with a limited number of assets
- Members’ Voluntary Liquidation: Medium to large sized solvent company with a substantial amount of assets
- Creditors’ Voluntary Liquidation: Insolvent company that has little chance of becoming solvent again using a restructure and turnaround.
For further information on deregistering a company arrange a free consultation with an insolvency professional at Australian Debt Solvers.
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