By Renee Smith a Solicitor of Matthews Folbigg, in our Insolvency, Restructuring and Debt Recovery Group.
What sort of debt recovery procedure exists for companies that have been deregistered? From time to time Matthews Folbigg are asked to advise clients in relation to debt recovery and enforcement of debts against debtor companies who have been deregistered.
So what can be done for debt recovery against a deregistered company?
Under section 601AD the Corporations Act 2001 (Cth) (“the Act”), once a company is deregistered it ceases to exist as a legal entity. As Monty Python would put it, the company, far from pining for the Norwegian fjords, ‘is no more’, and ‘has ceased to be’. As a result, all of the company’s property vests in ASIC (or in the Commonwealth if held on trust – a not uncommon situation for trading trusts) and any legal proceedings cannot be commenced or continued.
Unlike the Norwegian Blue, however, it is possible to resurrect a company that has been deregistered, for the purpose of enforcing a claim. This is under section 601AH(2) of the Act by making an application to the Federal Court or the Supreme Court of NSW as “a person aggrieved” by the deregistration. It is also possible for ASIC to reinstate the company if satisfied the company should not have been deregistered however ASIC’s preference appears to be to leave these matters for the Court if possible.
The relevant Court will order ASIC to reinstate the Debtor Company under section 601AH(5) should the Court be “… satisfied that it is just that the company’s registration be reinstated”. At this point, the legal process of debt recovery against the debtor company can continue.
However whether this is worthwhile will depend on the circumstances. The costs of reinstating a company can become quite expensive and should information regarding the company’s assets be unknown, there is the risk of throwing good money after bad.
However in the right case, the power to resurrect a company after deregistration can be a valuable debt recovery tool.
If you would like more information or advice in relation to insolvency, restructuring or debt recovery law, contact Renee Smith on (02) 9806 7485 or email@example.com or a Principal of the Matthews Folbigg Insolvency, Restructuring & Debt Recovery Group:
Jeffrey Brown on (02) 9806 7446 or firstname.lastname@example.org
Stephen Mullette on (02) 9806 7459 or email@example.com