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Articles and legal news from the Atkinson Vinden Team.

Risks of voluntarily deregistering a company

General

While voluntarily deregistration is the simplest way to close down a company that is no longer trading, directors must take proper steps to ensure strict compliance with the requirements of the Corporations Act 2001.

In our practice, we have observed directors apply to ASIC to deregister a company in circumstances whereby:

  1.  All members of the company did not agree to deregister; or
  2. The company’s assets were not less than $1,000; or
  3. The company had outstanding liabilities.

In all three circumstances, the companies should not have been voluntarily deregistered. Prior to applying for deregistration, the companies would have had to either (a) obtain agreement of all its members, (b) dispose of assets to bring the company’s assets to less than $1,000, or (c) satisfy its outstanding liabilities.

However, in making their applications to ASIC, the directors of those companies made false statements saying otherwise. The making of false statements to ASIC is a criminal offence and directors may face a penalty of $36,000 or 5 years in jail, or both. Additionally, a director may personally be subject to litigation brought by creditors or members of the de-registered company.