Company Liquidation for Small Companies

Members' voluntary winding up (solvent)

MVL is used when the company can pay all its debts in full within 12 months. Directors make a formal declaration of solvency supported by a statement of assets and liabilities. Members pass a special resolution to wind up voluntarily and appoint a liquidator. The liquidator takes control, realises assets, pays debts in full, and distributes any surplus to shareholders according to their shareholdings. Once final accounts and returns are lodged with ASIC, the liquidator applies for deregistration. MVL is the usual route where there is real value to return to shareholders and tax-planning opportunities around the sequencing of final dividends versus capital distributions.

Creditors' voluntary liquidation and simplified liquidation

A creditors' voluntary liquidation (CVL) is used where directors believe the company is insolvent or about to become insolvent. Directors resolve that the company should be wound up, convene meetings of members and creditors, and provide a report on the company's affairs. Creditors can confirm or replace the liquidator and may form a committee of inspection. Creditors rank for payment according to statutory priority, with employee entitlements ahead of ordinary unsecured creditors.

ASIC voluntary deregistration

Voluntary deregistration is only available for solvent, essentially dormant companies meeting strict conditions: all members agree to deregister, the company has stopped trading, assets are worth less than $1,000, there are no outstanding liabilities including employee entitlements, the company is not involved in legal proceedings, and all ASIC fees and penalties are paid. Lodge ASIC Form 6010 (online or through an intermediary) and pay the deregistration fee of $50 (2025-26, indexed annually on 1 July). Ensure all final tax returns and obligations are dealt with, close bank accounts, and cancel business names. ASIC publishes a notice, and the company is deregistered two months after publication.

Director Penalty Notices under Division 269

Division 269 of the Tax Administration Act 1953 makes individual directors personally liable for unpaid company PAYG withholding, Superannuation Guarantee Charge, GST, and in some cases Wine Equalisation Tax and Luxury Car Tax. Non-lockdown DPNs apply where returns were lodged on time. Directors can extinguish personal liability within 21 days of the DPN date by ensuring the company pays the debt in full, an administrator is appointed, a small business restructuring practitioner is appointed, or the company enters liquidation. Lockdown DPNs apply where BAS or SGC statements were not lodged within three months of the due date (one month for SGC). Under lockdown provisions, directors become automatically and permanently personally liable. Neither administration nor liquidation after the lodgement deadline will extinguish the penalty.

Tax consequences of winding up

In a solvent MVL, surplus distributions have CGT and potentially dividend components depending on how they relate to share capital and retained profits. Shareholders compare capital proceeds with their cost base, and CGT discounts or small business concessions may be available. Where the company is insolvent and there is no return to shareholders, shares may become of negligible value, potentially crystallising a capital loss. Company tax losses remain trapped in the company and cannot be distributed to shareholders personally. Once wound up and deregistered, undeducted tax losses are extinguished.

Employee entitlements and the Fair Entitlements Guarantee

Under the Corporations Act 2001, employee entitlements sit toward the top of the priority waterfall in liquidation. Outstanding wages and superannuation contributions (including SGC) rank first, followed by accrued leave entitlements (annual leave, long-service leave), then redundancy and retrenchment payments, with general unsecured trade creditors below. The Fair Entitlements Guarantee (FEG) under the Fair Entitlements Guarantee Act 2012 is a statutory last-resort safety net. FEG covers up to 13 weeks of unpaid wages (capped at an indexed maximum weekly rate), all accrued annual and long-service leave, up to five weeks' payment in lieu of notice, and redundancy pay up to four weeks per full year of service. FEG does not cover unpaid superannuation contributions. Directors, spouses, and close relatives may not be eligible. The employer must be in liquidation or bankruptcy (not just voluntary deregistration), and employees must lodge claims within 12 months.

Statute references

• Corporations Act 2001, Part 5.4-5.5 (winding up)
• Tax Administration Act 1953, Division 269 (Director Penalty Notices)
• Fair Entitlements Guarantee Act 2012
• Bankruptcy Act 1966 (personal insolvency interaction)

Frequently asked questions