What Is The Purpose Of A Winding-Up Notice, And When Is It Issued?

Facing a financial crash in the company impacts not only its owner and employees but also the creditors. In some cases, the loss is so fatal that it leads to the company’s insolvency. The winding up of a company in WA is a significant legal process when your business encounters Insolvency or when your group of directors discontinues operations. This legal procedure requires expert guidance from professional corporate law services in WA. It is governed by specific laws that need to be followed.

Let’s know through the help of this blog what a winding-up notice is, why we need it, and when it is issued. Also, know how a winding up of a company procedures lawyers in Perth can assist you during these challenges.

Defining a winding up notice:

The statutory demand under section 459E of the Corporations Act 2001, commonly referred to as winding-up notice, is an official claim made by a creditor to your company. This notice serves as an initial step towards winding up your company in WA, and it is mostly issued when your company is unsuccessful in paying its debts.

The winding-up notice serves as a coin’s two sides. In the first case, it serves as an ultimate warning to your company to settle your debts within an authorized period of 21 days. If your company fails to do so, the creditor can apply to the court to liquidate your company. On the other hand, it serves as a safeguard by law to ensure that creditors are successful in recovering their debts before further financial declination of the company.

Cases When a winding-Up Notice is Used:

When your company fails to pay the debts, a winding-up notice is issued in the name of the company. This failure is not only a sign of the company’s deteriorating financial health but also a sign that creditors must be particular about their objective when sending out a winding-up notice.

Given below are some situations when a winding-up notice is generally issued:

Failure to Pay Debts:

When your company owes debts to creditors above the statutory minimum, i.e., currently AUD 4000, and has failed to make any payments yet.

Tests Related to Insolvency:

When the law has pieces of evidence to support the belief that the company is insolvent based on the flow of cash and records of balance sheet evaluation,

The Legal Procedure:

When creditors employ legal procedures to extract payment from the company.

The Process of Winding Up of a Company:

The entire process of winding up of a company in WA is deliberately structured and comprises the following steps:

Issue of Winding-Up Notice:

A legal claim issued by the creditor to the company to inform that it has 21 days to either settle the debt or come to an agreement based on the law of WA.

Applying For Company Liquidation:

If the company fails to respond to the winding-up notice, the creditor has the right to apply to the court for the company to wind up.

The Session of Court and Order of Liquidation:

The court will schedule a hearing date to consider the application submitted by the creditor. If the court becomes satisfied that the company is insolvent and has failed to meet its debts, it has the authority to issue a liquidation order.

Appointment of a Liquidator:

A Liquidator is appointed to look into the process of winding up. The duties of a liquidator cover selling the assets of the company, distributing the proceeds to creditors, and finally, discussing the company.

Assistance of Corporate lawyers in Perth:

Initiating the procedure of winding up is a complex task that can be handled with skill by the best corporate lawyers in Perth. These professionals aid in the legal process. They advise you on the legal procedures for winding up a company in WA. They aid in issuing or responding to a winding-up notice, assist in representing the company in court, and negotiate with the creditors.

These corporate lawyers are skilled and experts in negotiation, and they help facilitate agreements between the company and its creditors and avoid the need for liquidation at the same time. In cases where liquidation becomes inevitable, these experts can successfully manage the process.

Summing Up!

The issue of winding up notice and winding up of a company requires a lot of legal understanding. Companies facing financial drawbacks are required to seek legal assistance from the company procedure lawyers in Perth who can help you get assured guidance to proceed with the legal steps related to the winding-up notice.