Recently I was approached by a client to consider whether it was possible to call a members' meeting to and place a company into creditors voluntary liquidation without the involvement of the director. In this particular case, the sole director passed away suddenly leaving the company without a director and in a position where it was no longer viable as a going concern.
I have previously been involved in a similar circumstance which resulted in a court application to appoint Simon Cathro and I as liquidators, a further application from the liquidators to seek leave to appoint themselves as voluntary administrators and stay the winding up. This allowed for a party to propose a deed of company arrangement which was accepted by creditors that involved the transfer of the shares of the Company and the appointment of a new director post acceptance.
A final further application to terminate the winding up was advanced and the resulting business still continues to trade profitably today.
But is there another way?
While directors typically hold a directors meeting at which they resolve to call a meeting of members so as to appoint a liquidator voluntarily, there are situations where directors are unable or are unwilling to do so.
When directors are incapacitated or unwilling to act members have the ability to appoint a liquidator by following the steps outlined in the process below.
- Determine the Need for Liquidation: Stakeholders must assess the company's financial health, identifying signs of insolvency, such as the inability to meet debts as they become due.
- Consulting Legal Counsel: It is advisable for members or creditors considering initiating a liquidation to seek legal advice from professionals experienced in corporate insolvency.
- Member Resolution for Liquidation: If directors are unable to call a meeting, members can take the initiative. Under Section 249D of the Corporations Act, members holding at least 5% of the voting rights can call a general meeting. During this meeting members can resolve to appoint a liquidator.
- Filing a Notice: To call the meeting, members must provide notice to all other members, stating the intention to appoint a liquidator. This notice should include the proposed liquidator's details.
- Holding the Members Meeting: At the meeting, members can discuss the company's financial status and vote on the resolution to appoint a liquidator. If a majority votes in favor, the liquidator is appointed immediately.
- Notifying the Appointed Liquidator: After the resolution, the appointed liquidator must be notified, and the company must file the necessary documentation with the Australian Securities and Investments Commission (ASIC).
- Liquidator's Role: Once appointed, the liquidator takes control of the company's assets and manages the winding-up process. Their responsibilities include collecting assets, settling debts, investigating the company's affairs, and distributing any remaining assets to creditors according to the statutory priority.
Conclusion
In circumstances where directors cannot or refuse to call a members' meeting, members themselves can, in certain circumstances, take the initiative to appoint a liquidator.
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.
