A wind-up notice is usually served on businesses by creditors, including the ATO, to enforce the payment of a debt. Wind-up notices are usually served after a statutory demand has already been served and you haven’t paid the debt within 21 days. At this stage, the court and your creditors assume your company is insolvent. You must now appear in court to determine whether your business is solvent and how it might pay the debt. If your business receives a wind-up notice, don’t delay in getting professional advice. While the notice is serious and urgent, you might still have options. At Vault, our experienced advisors can explore these options with you. Read more about how to deal with creditors if you receive a wind-up notice.
There are various ways to challenge a wind-up notice, such as showing:
If your challenge is successful, the court will simply rule not to wind up your business. If you plan to challenge a wind-up notice in any of these ways, act quickly to get professional advice on the best options for your situation.
If you believe the wind-up notice is a mistake, you can challenge the notice under section 465C of the Corporations Act 2001 by filing evidence of solvency. If you can prove that your company is solvent, you might successfully oppose the wind-up notice. If possible, provide evidence of why you didn’t comply with the statutory demand. You might need to give the court information about your business’s financial position, depending on the case. Having assets doesn’t necessarily prove your business is solvent, but the court might consider the types of assets and how quickly they can be converted to cash.
Sometimes, you might successfully challenge a wind-up notice if you can show your creditors have better chance of being paid if your business continues trading. You would need to prove that your business can continue to trade successfully, so the debt can be paid.
If a voluntary liquidation is already in progress, a court won’t usually order the company to be wound up. Generally, a court doesn’t see a difference between voluntary liquidation and a court-ordered wind-up.
You might successfully challenge a wind-up if any of your other creditors oppose the wind-up. The court will consider their views when making a decision. For example, the court might be less likely to order a wind-up if it would negatively affect unsecured liquidators.
Of course, opposing the wind-up isn’t your only option. If your business can pay the creditor in full or agree on a repayment arrangement, your business won’t be wound up at the hearing. Try to negotiate and offer a repayment arrangement your creditor might agree to.
Once you’ve been served with a wind-up notice, you usually have 21–28 days until the hearing. Any actions you take in response must follow a strict procedure, so act quickly to explore your options. If you decide to do nothing, the court will order that your business be wound up. Whether you want to continue trading, set up a repayment plan or pursue a different option, you should first talk to professionals, like company debt specialists, turnaround specialists and lawyers. At Vault, we can put you in touch with all these talented people who can look at your situation and set out your options. The earlier you do this, the better your chance of a good outcome for your business.