A wind up notice is issued by a creditor for money you owe, this is a time critical notice, and if you have just received one you need to act quickly. Ignoring it can be the worse thing your business can do.
A wind-up notice in Australia, formally known as a “winding up application,” is a legal action taken by a creditor against a company that owes them money. This process is initiated under the Corporations Act when a company fails to pay its debts. Here are the key aspects of what a wind-up notice entails and its implications:
- Issuance by Creditors: A creditor, such as the Australian Taxation Office (ATO) or another business, can issue a wind-up notice if a company owes a debt exceeding $4,000. The company is required to either pay the debt or make satisfactory arrangements for payment within 21 days of receiving the notice.
- Statutory Demand: A wind-up notice typically follows the failure of a company to comply with a statutory demand. A statutory demand is a formal request demanding that a company settle an outstanding debt within 21 days, serving as an initial step in debt recovery.
- Legal Proceedings and Liquidation: If the company does not respond appropriately to the notice within the specified period, the creditor can apply to the court for a winding up order. This can lead to the company being liquidated, where its assets are sold off to pay the creditors.
- Court Process and Company Options: The application for winding up is usually heard by the court within six months. The company has options to respond to this application, including challenging its validity or providing evidence of solvency to rebut the presumption of insolvency.
- Impact on Business Operations: While receiving a wind-up notice does not immediately require cessation of business operations, it is crucial for directors to be aware of their legal obligations to prevent insolvent trading. Continuing to trade after being deemed insolvent can result in personal liability for directors.
- Seek Professional Advice: Given the complexity and serious implications of a winding up notice, it is advised to seek legal and financial advice to understand the best course of action and to ensure compliance with legal obligations. We work closely with insolvency professionals and specialist insolvency solicitors and will help you through the process.
The wind-up notice is a serious matter indicating that a creditor is taking definitive steps to recover owed debts. It’s important for a company receiving such a notice to act swiftly and consider all available options, including payment of the debt, challenging the notice, or going into administration if necessary.