In the current environment, businesses are seeking to manage costs by running leaner structures.
A significant contributor to inefficient business practices includes maintaining redundant entities. Redundant entities risk over-complicating group structures, eroding group profits through unnecessary compliance cost and management time each year.
If this is the case for your business, Grant Thornton’s corporate simplification program may be able to help you streamline your business and achieve other benefits. We carefully review your corporate structure to identify those entities that can be removed and can create savings, improved corporate governance and transparency and reduce directors' exposure.
Common business triggers for corporate simplification
- Entities that have outlived their purpose, even where a company no longer trades, it remains on the ASIC register
- Growth through acquisitions or roll-up
- Inbound clients planning to exit Australia
- Shareholder disputes
- Change of IT or finance system – strip out duplication before going live
- Readying a group for IPO or private sale of part or all of the business
- Groups with inherent risk through loss of corporate knowledge of legacy entities
- Project finance driven structures
How we help
We assist organisations that need to reduce operating costs and achieve a more simplified and transparent corporate structure by eliminating entities that no longer serve a useful purpose.
We apply a risk-based evaluation of our clients’ business operations, identifying and addressing areas where transparency and efficiency could be improved and unnecessary costs avoided.
We help with the entire process, including:
- carefully reviewing the corporate structure
- undertaking a pre-liquidation review to identify any issues that require resolution prior to liquidation
- preparing documents needed to convene the various meetings required to place the company into liquidation or deregistration.
Methods for winding up a company
In your business simplification process, if you need to eliminate an entity there are two common methods to consider: Members Voluntary Liquidation and deregistration. Tax and past history of the company are key drivers of the choice between them.
Members Voluntary Liquidation (MVL)
In many cases, directors identify that the 'risk' benefits of a business undertaking an MVL clearly outweigh the small 'cost' benefit of a deregistration.
- In an MVL, tax clearances are obtained from the ATO. This confirms all lodgements are complete and there are no outstanding tax liabilities against the Directors.
- An MVL provides cost effective due diligence prior to liquidation, giving Directors peace of mind.
- Advertisements are made for any creditor claims making it more difficult to reinstate a company that has been deregistered via the MVL process.
- The liquidator can distribute material assets.
- There is a tax-effective distribution of assets to shareholders where there are pre-CGT assets and to utilise franking credits.
An MVL provides greater certainty and comfort to Directors.
Once a liquidator has been appointed, the process typically takes between 5-9 months to lodgement of final documents. ASIC then automatically deregisters the company three months after final documents are lodged.
For ASIC to accept an application for voluntary deregistration, the company needs to fulfil these requirements:
- All members of the company agree to the deregistration
- The company is not carrying on business
- The company’s assets are worth less than $1,000
- The company has paid all fees and penalties payable under the Act
- The company has no outstanding liabilities
- The company is not party to any legal proceedings
A deregistration may be effective where the company is dormant, has ceased trading, has no liabilities and assets less than $1,000. It must be able to meet the criteria for deregistration.
Deregistration is a shorter process and the cost to deregister is cheaper. It does not provide the same level of comfort to directors regarding advertising for creditors and the clearances obtained from relevant Australian tax bodies in an MVL.
An MVL is a solvent liquidation. Directors make a declaration that the company will be able to pay its debts in full within 12 months of the commencement of the winding up.
The Liquidator seeks clearances from both state revenue and federal Taxation Authorities, advertises the liquidation, and calls for any creditors to lodge details of their claim prior to distributing the remaining assets of the company.
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