27
Feb 2017

Termination of winding up revisited

In the recent decision of In the matter of The Wills Group Pty Limited (in liquidation) [2016] NSWSC 1907, the Supreme Court of New South Wales ordered that the winding up of The Wills Group Pty Limited (in liquidation) (Company) be terminated in circumstances where the proceedings leading to a judgment against the Company and the subsequent creditor’s statutory demand never came to the director’s attention.

Under section 482(1) of the Corporations Act 2001 (Cth) (Act), a Court may, upon application, make an order staying the winding up either indefinitely or for a limited time or terminating the winding up on a day specified in the order.  In this case, the director of the Company, Mr Lee, made an application on the basis that the Company was solvent and the matters which led to its winding up were no longer continuing.

In considering the application, the Court had regard to a number of factors, including:

  1. the current and potential residential building and construction projects to be undertaken by the Company, and importantly, some of which provided for deposits to be paid before the Company commenced the work;
  2. an expert report expressing the view that the Company was solvent;
  3. steps had been taken for funds to be provided to the liquidator of the Company to allow all of the debts of the Company to be discharged;
  4. there was no objection to termination of the winding up by the Company’s liquidator or the creditor that brought the winding up application; and
  5. there was no evidence to suggest non-compliance by the director of his previous statutory duties and nothing to suggest that the conduct of the Company’s business was contrary to commercial morality or the public interest.

In the circumstances, the Court considered that it was appropriate to terminate the winding up of the Company.  The decision serves as a timely reminder of the factors which a Court considers when exercising its discretion to terminate the winding up of a company.

Even in the unfortunate circumstances where a statutory demand never comes to the attention of a company, the Court will not provide a concession in its determination of an application to terminate the winding up.  However, as highlighted by this case, in such circumstances, it may easier for the relevant applicant to satisfy the Court that it is appropriate to terminate the winding up.

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