Have you ever considered the need to keep your Proprietary Limited Company? Have you asked what the implications would be if you wound it up? Do you even know that winding up may be an option for you and may have beneficial taxation consequences (depending on circumstances)?
These are all good questions. Before we get into the nuts and bolts of some of these answers, we will take a step back and confirm some of the facts that must be present for you to proceed:
- The Company is a Proprietary Limited Company (it has either Pty Ltd or Proprietary Limited as part of its name),
- The Company is Solvent (i.e. it has more assets than liabilities and it can pay all its debts from available assets within 12 months),
- The Company is no longer actively trading or is in the process of closing down or transferring the business, and
- The Company Shareholders want to wind up the Company.
If you are still with me, then I can tell you that there are two main ways to wind up your Company. These are:
- Deregistration, and
- Member Voluntary Liquidation.
Which method you choose will depend on various facts including the nature of the assets, the level of pre-CGT and post-CGT reserves, the amount of share capital and stamp duty depending on the state jurisdiction. (There are other options, including a Share Buy Back followed by Deregistration, however we will discuss this, if appropriate, directly with you.)
Why would I want to wind up my Company?
There are many reasons why a Company is established. The reasons can and do change as the tax laws change. Likewise, there are many reasons why a Company winding up would be considered. Some of the most prevalent reasons are:
- The Company has outlived its usefulness and no longer suits your needs
- You are reconsidering or amending your Succession Plan, and the Company is superfluous to your needs
- You want a simplified structure, thereby reducing annual compliance costs
- To maintain family harmony (where the Company structure may be restricting each individual from being master of their own destiny)
- Distribution of share capital and pre-capital gains tax (‘CGT’) capital reserves free from tax
- To transfer capital appreciating assets to a more CGT friendly environment
- To mitigate the effects of Division 7A. (This is a complex issue, and outside of the scope of this summary – If you need advice regarding this, please contact us via our Contact Page.)
How should I wind up my Company?
This is the important question. Deciding which method is appropriate for you will depend on your Company’s circumstances. At Astrum Consultants we conduct a review of your Company (at a fixed fee). Following that review, we report you to outline:
- Your options (and options for your Company),
- Tax implications for the Company,
- Tax implications for the Shareholders,
- Estimated timing of the winding up (a Deregistration will take a few months from start to finish, whereas a Member Voluntary Liquidation will take anywhere from 4 months to a few years, depending on the assets and the complexity involved in the winding up),
- What needs to occur prior to the planned winding up (to ensure the actual wind up process is as straight forward as possible), and
- Costs. We will outline all associated costs of the winding up (including Transfer (Stamp) Duty, Legal costs (if any), Advertising and GST). We will also provide you with our fixed fee quote to wind up the Company. We provide a fixed fee quote based on the information you have provided. This way, you know what you are getting, when you will get it and (most importantly) how much it will cost.
At the end of the day, you will make the decision based on good quality advice. Armed with all the information (and advice), you will be able to make the correct choice for your Company (and for your personal circumstances).
Are you experienced in this type of work?
Yes, we are!
This is another excellent question, and one which is not always asked (to the detriment of the client).
Robert Boni has managed the winding up of well over 200 Solvent Proprietary Limited Companies. His experience has seen him wind up:
- Large private land holding Companies
- Farming Companies
- Unlisted Public Companies
These clients have been from various industry sectors including:
- Medical Practice
- Abattoir/Meat works
- Recruitment Agent
If you have a Company that needs attention, or if you just want to know what your options are, contact us on our Contact Page.
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