Closing a business can be as simple as voluntarily deregistering the company with ASIC. However, if this option is not available to you, you may need to wind up the business by making a declaration of solvency (via ASIC Form 205) – although this process involves a few additional steps. Alternatively, a court may order the winding up of a company. 

Whether you’re nearing retirement, or just looking to close down your business, the winding up of a company can be a lot less complicated than you may think. Let’s explore everything you need to know about winding up a company. 

How to wind up a company 

According to ASIC, you must follow these steps as part of your wind up checklist for a solvent company: 

Step 1 – Directors must make a declaration of solvency 

This involves filling in ASIC Form 205, assuming you meet the criteria involved, such as being able to repay all debts owed to creditors. 

Step 2 – Company members must pass a Special Resolution to wind up the company 

Members must have at least 21-days-notice (in writing) of the meeting to vote on the special resolution, with 75% of members needing to be in favour for it to pass. 

Step 3 – Notice of the Special Resolution must be placed on the ASIC Published Notices website.

This must occur by the end of the next business day after a liquidator is appointed. 

Step 4 – Liquidator winds up the company’s affairs 

If at any point the business liquidator does not believe the company can repay its debts within 12 months, they must either: 

• Convene a meeting of creditors; 
• Appoint a voluntary administrator; or 
• Apply for the company to be wound up in insolvency. 

Step 5- Liquidator finishes winding up company and lodges financial documents 

The liquidator must lodge Form 5603 within one month following winding up. After this point, the company will be deregistered three months after this final form has been lodged. 

What is the difference between winding up and deregistering a company? 

At the end of a company’s life, directors typically have two options: company winding up or voluntarily deregistering the company. 

Voluntary deregistration is typically actioned when: 

• The company’s assets are worth less than $1,000. 
• All members of the company agree to deregister.
• The company is not conducting business.
• The company has no outstanding liabilities (e.g. Unpaid employee entitlements); 
• The company is not involved in any legal proceedings; and 
• The company has paid all fees and penalties payable to ASIC. 

Winding up describes the process of dissolving a company – typically when it does not meet the eligibility criteria for voluntary deregistration. The process of winding up generally includes selling company assets, paying creditors, and providing shareholders with any remaining assets. From this point, the company no longer exists.  

This typically occurs when it is determined that the business no longer needs to operate, whether the director is moving into a new phase of life, such as retirement, or the team has simply chosen to close up shop.  

Winding up a solvent company is appropriate in instances where the company is solvent, but fails to meet the eligibility criteria for voluntary deregistration, e.g. has assets totalling over $1,000.  

Winding up an insolvent company generally involves the appointment of a business liquidator or administrator, who is designated to settle outstanding company debts or obligations, according to ASIC regulations.  

The court may also order you to wind up, or close a company, if: 

• ASIC declares the company cannot repay its debts. 
• A company does not commence business within one year from incorporation. 
• A company suspends its business for a whole year.
• A company has no members (i.e. shareholders). 
• Directors have acted in their own interest, or acted unfair or unjust to the interest of company members as a whole. 
• If the court declares that winding up a company is just and equitable.  

Can you wind up an insolvent company? 

No, winding up a business is an option available to those that are solvent. Further, only solvent companies can voluntarily deregister with ASIC. 

If the company is insolvent, you may need to consider alternative options, such as liquidating a company or going into administration. Insolvent companies that have little chance of becoming solvent again specifically may need to consider Creditors’ Voluntary Liquidation (CVL). This is where a company’s members and/or shareholders determine it cannot service its debts, and deem the company to be insolvent, or likely to become insolvent. 

It may be worth seeking expert advice from a lawyer, or insolvency practitioner, if you’re planning on closing an insolvent company.   

What are the eligibility requirements to wind up a company? 

As mentioned above, to be eligible for the winding up of a company, it must: 

• Not meet the criteria for voluntary deregistration, i.e. have assets totalling over $1,000; 
• Be solvent – i.e. able to repay debts to creditors within 12 months; 
• 75% of members must be in favour of the Special Resolution to wind up the company; and 
• The Special Resolution must be passed on the ASIC published notices website. 

When it comes time to submit your ASIC Form 520 to wind up a company, you’ll need to officially declare that the majority of the directors of a company have formed the opinion that the company can pay its debts in full within 12 months of the commencement of winding up. You will also need to provide a correct statement of the company’s assets and liabilities as at the latest practicable date. 

How does this differ from the requirements for voluntary deregistration of a company? 

Unlike winding up a company, to be eligible to apply to voluntarily deregister a company, you need to ensure you meet the aforementioned criteria, such as the company’s assets being worth less than $1,000.  

To voluntarily deregister a company, ASIC states you must lodge an Application for voluntary deregistration of a company (Form 6010). Note, applicants will need to pay a $44 application fee. 

ASIC also recommends ensuring the following has been ticked off your deregister to-do list to avoid legal and/or tax consequences: 

1. Ensure all bank accounts in the company’s name are closed. 
2. Review records and registers to confirm all property is dealt with. Meaning all transfers of company property are registered, and no property is still registered in the company’s name. 
3. If the company was a trustee, ensure a new trustee has been appointed, and no trust property remains registered in the company’s name. 
4. Check that all registered business names held by the company are cancelled or transferred. 
5. Confirm that licences held by the company are cancelled or ceased. 

What if you change your mind after submitting the application to wind  up the company? 

If you change your mind about the winding up of a solvent company, you must reach out to ASIC as soon as possible. They will then review your request, and respond within 28 days.  

If you wish to cease a voluntary deregistration after submitting the application, it may be more complicated, as ASIC generally requires proof of mistake in the application process to cancel the deregistration, or notification by court order to follow through with a reinstatement. This also be initiated by contacting ASIC immediately, and explaining why the company should not be deregistered. ASIC will then review this request and respond within 28 days.  

In your request, you will need to include: 

• The company’s ACN.
• Your postal address. 
• Information and evidence around why you wish to defer deregistration. 

Alternatively, a third party may stop ASIC from deregistering a company if they are conducting legal proceedings against your company, or they intend to conduct legal proceedings shortly.