Is a company in liquidation truly dead?

Posted on May 19th, 2017

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When a company is placed into liquidation, is it really final? The case of SCW Pty Ltd (in liquidation) [2017] NSWSC 449 recently outlined the circumstances where the liquidation of a company may be terminated by the Court and the company reinstated. 

Prior to its liquidation, SCW Pty Ltd carried on a business primarily by way of investment in four properties and the ownership of two boats. The shareholding in the company was equally held by a husband and wife and their related corporate entities. The husband and wife were each directors of the company. The company was wound up by order of the Court on 11 April 2001 on just and equitable grounds due to ‘irreconcilable differences’ and deadlock between the directors. 

Subsequently in 2016, the parties resolved their differences with the wife selling her shares in the company to the husband and resigning as a director of the company. The husband then sought to have the liquidation of the company terminated and the company reinstated. When considering the husband’s application, Gleeson JA cited the guidelines established in Re Warbler Pty Ltd (1982) 6 ACLR 526 at 533 and the considerations Palmer J identified in Modena Imports Pty Ltd (in liq), In the Matter of Leveraged Capital Pty Ltd (R&M app) (in liq) v Modena Imports Pty Ltd (in liq) [2010] NSWSC 739 at 13 as follows:

  • The applicant must make out a positive case for the favourable exercise of the Court’s discretion;
  • The applicant must show the nature and extent of the creditors, and whether all debts have been discharged;
  • The attitude of creditors, contributories and the liquidator is a relevant consideration;
  • The applicant must show the current trading position and general solvency of the company;
  • The applicant must provide a full explanation of any non-compliance by the directors with their statutory duties;
  • The applicant must explain the general background and circumstances leading to the winding up order;
  • The applicant must show 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”

In the current case, it was noted by His Honour that the company was in fact solvent (and had been at all material times) and the primary reason for the winding up of the company, being the irreconcilable differences, had now been reconciled by the parties. Therefore, His Honour terminated the liquidation of SWC Pty Ltd allowing for the appropriate payment of the Liquidator’s fees and reinstated the company.

Lachlan Page, Solicitor at Mullane & Lindsay Solicitors, NewcastleLachlan Page is a Solicitor at Mullane & Lindsay Solicitors and practices extensively in commercial, business and property transactions and adviceIf you require any assistance in this area please contact Lachlan Page to arrange a consultation or contact our Newcastle office.

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