One of the most frustrating tensions we see as insolvency practitioners in businesspeople is between wanting to be paid and the cost and expense of taking the claim to Court. Here I will briefly touch on the process toward Liquidation of another company.
Firstly, there is a statutory minimum requirement of debt being worth at least $1,000 to liquidate another company. So, if your debt is worth less than that, you are unfortunately unable to use the Liquidation process.
Secondly, the legal costs associated with a simple liquidation application should be around $3,000- $5,000, depending on the complexity of your case. It should not be more than that.
To digress, I note that there is no actual requirement to hire a lawyer for this process. You can theoretically DIY the application. However it may cause some delays with the Court in filing your documents, among other things.
The process begins by issuing what is called a “Statutory Demand”. This is effectively a formal demand for payment that is recognised by the Courts. In the liquidation process, the statutory demand can be used as evidence of insolvency, one of the requirements to a successful Liquidation application.
After that, the company has several options. They can appoint their own Liquidator, which in theory should be independent. However, there is a perception that shareholder-appointed Liquidators are somehow less frightening or friendlier than court-appointed ones.
Appointing a liquidator by the shareholders can only be done within ten days of being served with a liquidation application. However, the law on this is contentious, so it is best to contact a lawyer for advice in this regard and appoint as soon as possible.
Alternatively, unless the company is willing to front up with the money, their company will likely be going into Liquidation. Before this is done, however, your lawyer will need to obtain consent from the Liquidator you wish to appoint. Greg Sherriff, Waterstone’s Liquidator, is more than willing to help you in this regard.
We offer a free, no-obligation 30-minute consultation. So, for all your Liquidation requirements, please contact us on 0800 CLOSED or [email protected].