A company is placed into official liquidation after an interested party, usually a creditor, makes a court application to have the company wound up because it cannot pay its debt (or debts) or its assets are at risk.

An Official Liquidation allows the company’s assets to be secured and realised in an orderly manner. It also allows for the company’s affairs and its failure to be investigated and, if possible, the any proceeds from the sale of its assets to be distributed to its creditors.

An Official Liquidation is generally commenced by the following process:

• a creditor issues a company with a Creditor’s Statutory Demand for payment of an outstanding debt;
• within 21 days of receiving the Creditor’s Statutory Demand the company must either pay the debt or apply to a court for the demand to be set aside;
• if the company does not pay the debt or have the demand successfully set aside, the applicant creditor can apply to the court to have the company wound up;
• the court will then set a date for the winding-up application to be heard and the applicant creditor must then serve upon the company a relevant copy of the application; and
• at the hearing, the court will decide whether the appointment of the liquidator should proceed with the company being placed into liquidation.