With the necessary approval, a liquidator may legally destroy his or her records of a winding up soon after it is finalised. The same is true of books and records of the liquidated company. (See section 542 of the Corporations Act 2001 “the Act”.)
In the case of a creditors’ voluntary winding up approval must be obtained from creditors and then the Australian Securities and Investments Commission (ASIC). In a winding up by the Court approval must be obtained from the Court.
The provisions in the Act for early destruction make sense. Or at least they do in so far as they pertain to the books and records of the liquidated company that exist at the commencement of the winding up. At that stage a company may have a vast collection of books and records. Without special laws a liquidator would be required to store them for 5 years after the company ceased to exist. Multiply this cost by the many administrations that a liquidator may have and the sum becomes exorbitant, and needlessly so.
But in the case of books and records created subsequent to commencement of the winding up, the argument for early destruction is much weaker, particularly now that society seems to be demanding that liquidators be more accountable and more closely supervised. (For example, see the Australian Senate Committee Report: “The regulation, registration and remuneration of insolvency practitioners in Australia: the case for a new framework“, September 2010.)
(This aspect of the law in relation to retaining books is discussed in my earlier article headed: “Retaining books and records post liquidation”.)
Nonetheless, the main purpose of this article is to draw the attention of liquidators to an application form that I have prepared for use in applying for early destruction of books in a creditors’ voluntary liquidation. (There is no statutory form for an application.)
My standard form may be found at:
www.insolvencyresources.com.au/CvoliqPractPack.htm
Before applying to ASIC a resolution approving/directing the early destruction must be passed by creditors, either through the committee of inspection – if there is one – or at a meeting of creditors. This is usually a standard item on the agenda at the first or second meeting.
ASIC’s Regulatory Guide 81 (RG 81) sets out what information the application must contain. A little less information is required if the application is made after the company is deregistered. But an application can be made before deregistration and even up to 2 months before the final meeting of members and creditors.
Essentially the application requires the liquidator to supply a copy of the committee or creditors’ resolution and to state that:
- no litigation by or against the liquidator or the company is in process, is contemplated or is expected;
- no one has asked for access to the books;
- no circumstances exist in relation to the company or an associate (as defined in section 11 of the Act) which may result in the books being required within 5 years of the company’s deregistration;
- the liquidator has lodged his or her investigation report and received a “no further action” type clearance from ASIC;
- the liquidator has satisfied all his or her lodging and reporting requirements; and
- there are insufficient funds in the liquidation to meet the costs of storing the books for 5 years.
Presumably if there are circumstances which exist in relation to the company or an associate which may result in the books being required within 5 years of the company’s deregistration, a liquidator who, nevertheless, wants permission to destroy the books would have to present a submission to ASIC for its consideration.