How to Deregister a Solvent Company

Clients often contact Lawler Partners to determine the options available to deregister solvent entities. Once you have identified that you have a company that is no longer required, you can take action to have the company deregistered with the Australian Securities and Investments Commission (“ASIC”).

You have two (2) options depending on the current status of the company. They are:

1.     Undertake a ‘strike off’ procedure; or

2.    Undertake a Members’ Voluntary Liquidation (“MVL”).

Strike off Procedure

An application to strike off a company can be made by lodging a Form 6010 “Application for voluntary deregistration of a company” with the ASIC. However, this application can only be made subject to the following conditions:

• all members of the company agree to the deregistration; 
• the company is not carrying on business; 
• the company's assets are worth less than $1,000;   
• the company has paid all fees and penalties payable under the Corporations Act 2001; 
• the company has no outstanding liabilities; and
• the company is not a party to any legal proceedings.

If you require assistance with these applications, we can be engaged to prepare the applications and liaise with ASIC on your behalf.

MVL Process

The MVL process, defined by the Corporations Act 2001, enables a company to be wound up, provided it is solvent and therefore able to pay its debts in full within 12 months after the commencement of the winding up.

This process has been designed where a company no longer has a commercial use. 

The summary of events and timing in which activities occur may vary depending upon the circumstances impacting upon the MVL process, in particular the status of taxation lodgements and liabilities.

Benefits of a MVL v Strike Off Procedures

There are many benefits of an entity proceeding with a MVL compared to a strike off application. In a MVL:

• The costs of the liquidation are tax deductible equally over 5 years if invoiced to and paid by the shareholders of the company;
• Pre Capital Gains Tax (“CGT”) gains and reserves can be distributed tax effectively by the liquidator;
• The liquidator may be able to apply the small business CGT concessions to any business asset sales and distributions to shareholders;
• The liquidator will apply the Company’s franking account balance to any distributions of retained profits; 
• A notice is advertised in a daily newspaper circulating in each state or territory where the company was registered or carried on business. This advertisement calls for potential claims of creditors and assists to ensure that all liabilities are dealt with during the liquidation period;
• Clearance for both Company tax liabilities and tax lodgements is obtained from the Australian Taxation Office before finalising the liquidation; 
• The company is automatically deregistered by ASIC three months after a final meeting date; and
• If the entity has been wound up due to director/shareholder disputes then engaging an external administrator can ensure both parties view the process as independent.

The tax implications will be specific to each individual shareholder and to each Company and should be discussed directly with your accountant.

In summary, a strike off request requires that there are less than $1,000 in assets, no liabilities, all reserves distributed, and all taxation issues dealt with. Often this is not the case. In this case, shareholders will need to place the company into a MVL. A MVL process advertises for claims and obtains tax clearance before winding up the Company, therefore being a more decisive termination of the company.