There is a common misunderstanding that if an order is made winding-up a company then this order is set in stone. This, however, is not the case.
The corporations law provides a means to wind back the clock, which essentially permits a company to resume its business as if no winding-up order had been made.
There are two different ways in which a winding-up can be reversed:
- seeking to stay or terminate a winding-up; and
- seeking to set aside the order winding-up a company.
How do I seek to stay or terminate a Winding Up?
Section 482 of the Corporations Act 2001 (Cth) (the Act) gives the Court power to either stay the winding-up (either indefinitely or for a limited period) or to terminate the winding up.
Note: In practice, if a Court is satisfied of the requisite criteria, an order terminating the winding-up is more likely to be made.
Stays for a limited period of time are rarely given.
The Act does not provide a specific list of criteria which needs to be satisfied to successfully apply for the termination or stay of a winding-up.
The Courts, however, in their decisions which consider this type of application (see for example Re: Warbler Pty Ltd (1982) 6 ACLR 526), have set out a range of factors to be taken into account.
These factors include:
- the interests of:
- the creditors, including their attitudes and whether their debts have been discharged;
- the liquidator;
- the members of the company; and
- the public, including whether the conduct of the company was in any way contrary to commercial morality or the public interest;
- the general background and circumstances which led to the winding up of the company, including an explanation of any non-compliance by the directors with their statutory duties; and
- the present and future solvency of the company.
This list of factors is non-exhaustive and generally the most important factor is the solvency of the company.
In the matter of Glass Recycling Pty Ltd (ACN 001 332 654)  NSWSC 439, Brereton J explained that although it is generally said that an order terminating the winding up will usually be made if:
- all the creditors are paid out;
- the liquidators’ costs and expenses are covered; and
- the members agree,
the Court will also consider whether the state of affairs that required that the company be wound is not likely to reoccur in the foreseeable future.
The power to make an order under section 482 of the Act is discretionary and the onus is on the applicant to make out a positive case for termination.
It should not be assumed that an order staying or terminating a winding-up will be made, even in circumstances where one may feel they met the ‘general’ factors considered by the Court, see In the matter of Rainbow Carlingford One Pty Ltd (in liquidation)  NSWSC 971.
How do I seek to set aside a Winding-Up order?
Rule 39.05 of the Federal Court Rules 2011 (Cth) (the Rules) gives the Court power to set aside a winding-up order made in the absence of a party.
In the matter of George Ward Steel Pty Ltd v Kizkot Pty Ltd (1989) 15 ACLR 464, the Supreme Court of New South Wales held that the Court should exercise its power to set aside a winding up if:
- the order was made in the absence of the company;
- the application to set aside the order is brought promptly;
- a good explanation is provided for the non-appearance;
- notice is given to the liquidator, to the company or individual who sought the company be wound up and to any creditor who appeared at the hearing;
- there is consent, or as a minimum no opposition, to the setting aside; and
- the liquidator has not found anything in his or her investigations showing a reason for the company to be stopped from trading.
The power to make an order under Rule 39.05 of the Rules, much like an application for termination, is discretionary, meaning that even if the above considerations exist, there is no guarantee that the order setting aside a winding up will be made.
What should I do next?
If your company has been wound up and you wish to find out what options are available, you should seek urgent legal advice.
At Hunt & Hunt, we have a national insolvency team who can assist you with anything insolvency-related, including with advice on the options available following the winding-up of your company.
If you require advice specific to your circumstances, please don’t hesitate to get in touch.
Matt Gauci, Senior Associate
Jessica Egger, Lawyer