Australia: Winding back the clock: can a company have a winding-up order terminated because the company did not know about the application?

Last Updated: 20 September 2018
Article by Laura Quarrell

What are your responsibilities if there is a change to your company's registered office?

The Corporations Act 2001 (Cth) (the Act) sets out an exhaustive (and even onerous) list of duties for Australian registered companies and their directors. Among these is the duty to notify the Australia Securities and Investment Commission (ASIC) of a change to the company's registered office. This must be done within 28 days of the change in location.

Although you can update registered office online through ASIC Connect, or through lodging a Form 384, companies often forget to update their registered office when the company moves offices or when they change accountants or solicitors.

Not having an up to date registered office may have commercial ramifications for a company's day-to-day business activities. It can also have more serious consequences – you could fail to receive a document simply because it has been served at the company's former registered office.

How is a company validly served?

Under s 109X(1)(a) of the Act, a document can be served on a company by leaving it at or posting it to the company's registered office .

It is important to be aware that even if the document is never received by the company or is returned to the sender as a result of the change of address the document is still deemed to be served on the company validly.

Failing to receive documentation that has been served at an old or out-of-date registered office can even result in a company failing to receive a crucial document, such as a statutory demand or a winding-up application.

For example, technically, a company could be wound up in insolvency in accordance with Section 459A of the Act simply because it failed to respond to a statutory demand or defend a winding-up application made by one of its creditors.

This means that if a company has not updated its registered office it could be wound up without knowing that a winding-up application had been validly served. In addition, it would not have the opportunity to consider the application or file a defence.

After a court order has been made to wind up a company, it is too late to have the company reinstated?

How can a winding-up application be set aside?

Section 482 of the Act provides the court with a discretionary power to terminate the winding up of a company and have the company reinstated to the control of the directors.

In order to convince the court to use this power, it is not sufficient for the company to prove that it did not have knowledge of the winding-up application because it failed to update its registered office.1 Rather, in determining whether it will grant the application, the court will consider a wide range of issues, including:

  • The attitude of the creditors, contributories, and the liquidator to the application and whether they consent to or do not oppose the application;
  • The current trading position of the company and whether the company is solvent;
  • Whether the company's directors have provided a full explanation of any non-compliance with their statutory duties;
  • The explanation of the general background and circumstances that led to the winding up order; and
  • The nature of the company's business and whether the conduct of the company was in any way contrary to 'commercial morality' or 'the public interest'.

If you are seeking to determine whether a winding-up application should be terminated, you also need to be aware that:

  • The onus is on the applicant (i.e. the company) to make out a positive case for a stay;
  • The application should be brought as quickly as possible; and
  • The applicant must serve notice of the application on all creditors, the liquidator and the members.

The importance of solvency and public interest considerations

As the court's power is discretionary, the list above is not exhaustive. The court will also examine two additional questions:

  • Is the company solvent?
  • Are there any public interest considerations that should prevent the company from being reinstated?

You will neeed to satisfy the court of both these facts if you are to have any chance of persuading the court to terminate the winding-up order.

Solvency

A company must demonstrate that it is solvent in order to satisfy the court that the situation that required the company to be wound up no longer exists.

Solvency is defined in s 95A(1) of the Act as the ability to pay all debts as and when they become due and payable.

Therefore, an application is usually successful if the company can satisfy the court that:

  • All creditors have or will be paid;
  • The liquidators' costs and expenses will be met (or have already been met) by the company; and
  • The members agree to terminate the winding up.

However, assessing a company's solvency is a question of fact to be ascertained from a consideration of the company's financial position taken as a whole, both before the winding-up order was made and taking into consideration the future of the company.2

For a company with a complex financial structure, it may be difficult to satisfy the court that the company is solvent, particularly when the evidence is being given by a director or shareholder of the company.

As such, applicants commonly have to rely upon expert evidence from an independent and external accounting expert to demonstrate to the court that the company is solvent.

For this reason, the applicant in Ibrahim v Deputy Commissioner of Taxation (Ibrahim) relied on both an external and independent accountant to prepare and provide a report that was able to satisfy the court that the company was solvent.3

Footnotes

1 In Ibrahim v Deputy Commissioner of Taxation [2018] FCA 456, Justice Farrell reiterated the principles and common factors first particularised by Master Lee QC in Re Warbler Pty Ltd (1982) 6 ACLR 526 (Warbler) at 533 and explained by Edelman J in Doolan; , in the matter of MIH Company Pty Ltd (in liq) v ; MIH Company Pty Ltd (in liq) [2015] FCA 1130 at [9]-[11].
2 See Southern Cross Interiors Pty Ltd (in liq) v Deputy Commissioner of Taxation (2001) NSWSC 621 at [54] and followed in Ibrahim v Deputy Commissioner of Taxation [2018] FCA 456.
3 Ibrahim v Deputy Commissioner of Taxation [2018] FCA 456

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions