How To Close A Company

If you think that closing a business is easy as just ceasing your operation, well it is absolutely not. It can be exhausting and time consuming depending on its size and complexity. Closing a company is done by deregistering it in Australian Securities and Investments Commission (ASIC).While it is not yet deregistered, it is still subject to all the legal requirements of a registered company including annual review fee.

How can a company be deregistered?

There are four instances that a company can be deregistered; Voluntary deregistration: 2Winding up a solvent company, ASIC-initiated deregistration and insolvency. Applying for voluntary deregistration requires a Members Resolution. It is a legal document stating that members or shareholders agree to voluntarily close the business; that the company is no longer trading; has paid all liabilities; is not a party to any legal proceedings; the company’s assets are worth less than One Thousand Dollars ($1,000; and has paid all fees and penalties payable under the Corporations Act 2001).

The company’s accountant can prepare the Members Resolution. For winding up a solvent company, the following should be achieved before deregistration; systematic winding-up of the company’s affairs, selection of a liquidator for handling the realisation company’s assets, ceasing or sale of its operations, payment of its debts and distribution of surplus assets among its members. 2On the other hand, ASIC has the power to initiate deregistration of a company; if ASIC has not received an annual review fee payment for a minimum of 12 months after its due date, no response was obtained after a Company compliance notice for at least 6 months after the required date of response; or the company has not lodged any other document in the last 18 months and there is no reason to believe the company is carrying on business.

While insolvency of a company can be a ground for deregistration, generally it shall comply with the common corporate insolvency procedures; voluntary administration, liquidation and receivership. Before applying for the deregistration, the company must first notify its employees. Salaries of the employees must be finalised and give separation fees if necessary. Suppliers and contractors should also be informed that the company will no longer be doing business.

All accounts with contractors and suppliers must also be settled to avoid problems in the deregistration process. When the company carries an Australian financial services licence or an Australian credit licence, the following should be performed prior to deregistration; cancel credit license, cancel AFS license and ask to return the security bond, and complete Form 6010 or the Application for voluntary deregistration of a company with the ASIC.

[ctt template=”7″ link=”b42af” via=”no” ]All accounts with contractors and suppliers must also be settled to avoid problems in the deregistration process.[/ctt]

All outstanding fees with the ASIC must be paid before the application is submitted. It takes approximately one week for the ASIC to process the application. For two months, the company will be published in the Commonwealth of Australia ASIC Gazette that it is applying for deregistration. If there are no objections to the application, ASIC will remove the company to its register and it will no longer be considered as a legal entity.

Aside from the requirements of ASIC, the obligation to the Australian Tax Office (ATO) should also be accomplished. Such responsibilities are lodging final returns including all the activity statements of the company, deal with pay as you go (PAYG) withholdings and all tax liabilities are fully paid; cancellation of goods and services tax (GST) registration and Australian Business Number (ABN) through notification with ATO within two days and 28 days of ceasing trading, respectively; retention of all business record for a period of five years.

When a company is deregistered it can no longer do anything in its own right. Its company’s property, except trust property, vests in ASIC. Its trust property (i.e. property held by the company on trust) vests in the Commonwealth. Moreover, the former officeholders have no right to deal with the vested property. But for whatever reason company members decide to close a company, most important is that the decision must be of the company’s best interest.

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