Liquidation Lawyers Brisbane: What a Liquidator Actually Does to Your Company

If your company is being wound up — or you are a director, creditor, or shareholder of a company that has just had a liquidator appointed — the next few weeks will define what you recover and what you lose. This guide explains what a liquidator actually does, what powers they hold under the Corporations Act 2001 (Cth), and what directors and creditors in Queensland need to know before the process begins.

What Is a Liquidator and Why Are They Appointed?

A liquidator is a registered insolvency practitioner appointed to formally wind up a company. Their appointment ends the company’s operations and begins a structured legal process of collecting assets, investigating the company’s affairs, paying creditors in a prescribed order of priority, and ultimately deregistering the company.

Liquidators are appointed in two primary ways:

• Court-ordered liquidation (compulsory winding up): A creditor applies to the Federal Court or Supreme Court for a winding up order, typically after a statutory demand has not been complied with. The court appoints an official liquidator.
• Creditors’ voluntary liquidation (CVL): The company’s directors and shareholders resolve that the company cannot pay its debts and pass a resolution to wind it up voluntarily. A liquidator is then appointed by the creditors.

There is also members’ voluntary liquidation (MVL), used when a solvent company is being wound up — but this is a separate process typically used for restructuring or succession planning.

Once a liquidator is appointed, the directors lose all authority over the company. The liquidator assumes control entirely.

What Does a Liquidator Do? The 6 Core Functions

1. Take Control of the Company’s Assets

Immediately on appointment, the liquidator takes possession and control of all company property. This includes bank accounts, plant and equipment, stock, intellectual property, real estate, and any money owed to the company. Directors cannot deal with any company asset from the moment of appointment without the liquidator’s consent.

In practice, this often means:

• Bank accounts are frozen and redirected to the liquidator’s trust account
• Employees are terminated (unless the liquidator chooses to continue trading temporarily to preserve value)
• Premises are secured and access is controlled
• Debtors are notified to pay outstanding invoices to the liquidator, not the company

2. Investigate the Company’s Affairs

Under s 533 of the Corporations Act 2001, the liquidator is required to investigate the company’s affairs and report to the Australian Securities and Investments Commission (ASIC) if they identify evidence of:

• Insolvent trading under s 588G (directors allowing a company to incur debts when it is unable to pay them)
• Offences committed by directors, officers, or employees
• Misconduct in relation to the company’s affairs

This is not optional. ASIC receives these reports and may use them to pursue civil or criminal action against directors. Liquidators have a duty to investigate rigorously — not to protect directors, but to maximise recovery for creditors.

3. Summon Directors and Officers to Public Examination

One of the most significant powers available to a liquidator is the right to summon any person who has information about the company’s affairs to a public examination before the court under s 596A of the Corporations Act 2001.

A public examination is not a casual interview. It is a formal court proceeding where the person is examined under oath and required to answer questions about:

• The company’s assets, liabilities, and financial position
• Any transactions entered into in the period before insolvency
• Conduct of directors, including transfers of assets or payments to related parties
• Any decisions that may have contributed to the company’s financial failure

Answers given in a public examination can be used in subsequent civil litigation against directors. There is no right to remain silent on the basis that the answers may be self-incriminating (with limited exceptions). This is one of the most powerful investigative tools in Australian insolvency law — and one of the most underestimated risks for directors.

If you receive a summons to a public examination, you need a liquidation lawyer in Brisbane before your appearance. The examination is on the public record, and what you say can and will be used against you.

4. Recover Assets Through Voidable Transaction Claims

A liquidator has statutory power to claw back assets and payments made by the company before insolvency. These are called voidable transactions, and they include:

• Unfair preference claims (s 588FA): Payments made to unsecured creditors in the six months before the relation-back day that gave that creditor a better result than other creditors. The lookback period extends to four years for related party payments.
• Uncommercial transactions (s 588FB): Transactions entered into for inadequate or no consideration — including selling company assets at undervalue, forgiven loans, and unequal transfers to related parties.
• Insolvent transactions (s 588FC): Any transaction entered into when the company was insolvent or that made the company insolvent — the foundational category that catches most clawback claims.
• Creditor-defeating dispositions (s 588FDB): Transfers of company property for less than market value within 12 months before liquidation, where the purpose was to defeat creditor claims. ASIC can apply to void these transactions independently of the liquidator since 2021.

Successful voidable transaction claims can result in the recipient being ordered to repay the money or return the asset to the liquidation estate — regardless of whether the recipient knew the company was in financial difficulty at the time.

5. Assess Director Liability for Insolvent Trading

Under s 588G of the Corporations Act 2001, a director commits a civil contravention if they allow a company to incur a debt when the company is insolvent and there are reasonable grounds to suspect insolvency. The liquidator is required to assess whether insolvent trading occurred and report their findings to ASIC.

Where insolvent trading is established, the liquidator can pursue the director personally for the amount of debts incurred during the period of insolvency. This is a personal liability that pierces the corporate veil — and it can run to hundreds of thousands of dollars, or more, depending on how long the company continued to trade after insolvency.

Directors have available defences under s 588H of the Corporations Act 2001, including the safe harbour defence under s 588GA (where the director had a course of action that was reasonably likely to lead to a better outcome for creditors). But these defences require documentation — they are not available simply by assertion after the fact.

6. Pay Creditors in the Statutory Order of Priority

Once assets are collected and recoveries made, the liquidator distributes funds to creditors in the order prescribed by s 556 of the Corporations Act 2001:

1. Costs and expenses of the liquidation (including the liquidator’s fees)
2. Employee entitlements (priority creditors): unpaid wages (up to $2,000 per employee), leave entitlements, and superannuation contributions
3. The Fair Entitlements Guarantee (FEG) — a government-funded backstop for employee entitlements
4. Unsecured creditors (including trade creditors, the ATO for unpaid GST and PAYG, and financiers without security)
5. Shareholders/members (only if a surplus remains after all creditors are paid — which almost never occurs in a CVL)

Secured creditors (those holding a valid PPSA security interest or registered mortgage) are paid from the proceeds of the specific assets over which they hold security, and this takes priority over the order above.

In most creditors’ voluntary liquidations, unsecured creditors receive little or nothing. The liquidation process exists to impose structure and accountability — not to guarantee full recovery.

How Long Does Liquidation Take?

A straightforward CVL where there are few assets, no disputes, and no significant investigation typically takes 12 to 18 months to finalise. Complex liquidations involving significant asset realisation, voidable transaction litigation, director recoveries, or public examinations can take three to five years.

During this period, the liquidator files six-monthly reports with ASIC and creditors detailing their investigations and any distributions made.

What Should Directors Do Before a Liquidator Is Appointed?

If your company is approaching insolvency and a liquidation is likely — whether through a creditor’s winding up application or a directors’ resolution — taking legal advice before the liquidator arrives is essential. The key actions are:

1. Document your decisions: The safe harbour defence under s 588GA requires contemporaneous evidence of a restructuring plan. Notes, board minutes, and professional advice obtained before insolvency are your defence if the liquidator later pursues insolvent trading claims.
2. Do not move assets or make unusual payments: Any preferential payment or asset transfer in the lead-up to liquidation is a prime target for voidable transaction claims. This includes repaying loans from directors or related parties.
3. Preserve all company records: Liquidators are required under s 530B to take control of company books and records. Destroying, concealing, or failing to hand over records is a criminal offence under s 530A of the Corporations Act 2001.
4. Get advice on your personal liability exposure: If the company has been trading while insolvent, the sooner you understand your personal exposure and available defences, the more options you have.
5. Consider alternatives to liquidation: In some cases, voluntary administration or small business restructuring may provide a better outcome than immediate liquidation — for both the company and the director’s personal position.

What Should Creditors Do When a Liquidator Is Appointed?

If you are a creditor of a company that has just gone into liquidation, your options are more limited than before the appointment — but there are still steps worth taking:

• Lodge a proof of debt: You must formally lodge a proof of debt with the liquidator to participate in any distribution. Contact the liquidator immediately for their proof of debt form.
• Attend the creditors’ meeting: The first creditors’ meeting is your opportunity to ask questions about the company’s affairs, vote on the liquidator’s appointment, and understand the likely recovery outcome.
• Review any payments or transactions the company made to you: If you received a payment from the company in the six months before liquidation, a liquidation lawyer can assess whether you are at risk of an unfair preference claim and advise on the available defences (including the good faith defence under s 588FG).
• Consider whether a Related Party or Director Recovery action applies: If a director stripped assets or paid themselves ahead of creditors, the liquidator has standing to pursue those recoveries. You can assist by providing information and evidence to the liquidator.

For creditors who are owed significant sums, engaging an experienced commercial debt recovery lawyer in Brisbane alongside the liquidation process can make a meaningful difference to your ultimate recovery outcome.

The Role of a Liquidation Lawyer in Brisbane

A liquidation lawyer is not the liquidator. They are independent legal counsel who acts for one of the parties in the liquidation — typically the director, a creditor, a related party, or occasionally the company itself (pre-appointment).

The scenarios where a liquidation lawyer in Brisbane is essential include:

• You are a director facing a public examination summons under s 596A
• You have received a letter of demand from a liquidator alleging unfair preference or insolvent trading
• You are a creditor who wants to challenge the liquidator’s decisions or maximise your recovery
• You believe assets have been improperly transferred before liquidation and want to assist a liquidator (or pursue them independently)
• Your company is facing a creditor’s winding up application and you need to understand whether to contest it, negotiate, or resolve the underlying debt
• You are a director of a company approaching insolvency who wants to explore voluntary administration, small business restructuring, or other alternatives before control passes to a liquidator

Acting early — before the liquidator files their s 533 report with ASIC — gives you significantly more options than responding after the fact.

How Boss Lawyers Can Help

Boss Lawyers regularly acts for directors, creditors, and related parties in Queensland liquidation matters. Whether you are facing a public examination, responding to an unfair preference claim, or seeking advice on your personal exposure as a director, we can help you understand your position and protect your interests.

Mark Harley has 17 years of experience in commercial litigation and insolvency. We take on complex, high-value matters where the outcome genuinely matters — and we operate from Level 27, Santos Place, Brisbane, servicing directors and creditors across Southeast Queensland.

Call us on 1300 267 711 or contact us through our insolvency services page to arrange a consultation.

Frequently Asked Questions

What is the difference between a liquidator and a voluntary administrator?

A voluntary administrator is appointed to assess whether a company can be saved — through a deed of company arrangement (DOCA) or by returning the company to its directors — or whether liquidation is the best outcome for creditors. An administrator’s appointment is temporary (usually 20 to 25 business days). A liquidator is appointed to wind up the company permanently and distribute assets to creditors. If a DOCA fails or is not approved, the company moves into liquidation and a liquidator is appointed.

Can a director be personally liable after their company goes into liquidation?

Yes. The most significant exposure is insolvent trading under s 588G of the Corporations Act 2001 — where the director allowed the company to incur debts when it was insolvent. The liquidator assesses this and can pursue the director personally. Directors can also face liability for Director Penalty Notices (DPNs) from the ATO for unpaid PAYG and superannuation. Personal guarantees to lenders and suppliers also survive the company’s liquidation and become immediately enforceable against the director.

How does a liquidator find out if the company traded while insolvent?

Liquidators analyse the company’s financial records, including management accounts, BAS lodgements, ASIC lodgements, bank statements, and creditor payment histories. They look for signs of insolvency including: inability to pay debts as they fell due, letters of demand, default judgments, dishonoured cheques, reliance on one creditor to pay others, and communication with the ATO about payment plans. Public examinations of directors and officers are another key investigative tool — sworn answers to questions about the company’s financial position.

What happens if I received a payment from a company that later went into liquidation?

You may receive a letter from the liquidator demanding repayment under an unfair preference claim (s 588FA of the Corporations Act 2001). This applies where your company received payment while the insolvent company was unable to pay other creditors, and the payment gave you a better result than you would have received in the liquidation. You may have a defence under s 588FG if you acted in good faith, had no reasonable grounds to suspect insolvency, and provided valuable consideration. Legal advice is essential before responding to a liquidator’s preference claim demand.

How much does liquidation cost and who pays?

Liquidator fees and disbursements are paid from the assets of the company as the first priority — ahead of all creditors, including employees. The hourly rates of registered liquidators typically range from $300 to $600 per hour depending on complexity and seniority of staff involved. In small liquidations with few assets, the liquidator’s fees may consume all available funds, leaving nothing for unsecured creditors. Where assets are insufficient to fund the liquidation, creditors or ASIC may be asked to fund the liquidator’s investigations — ASIC has a deed of company arrangement (DOCA) funding mechanism in some circumstances.

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Liquidation often exposes directors to personal liability for insolvent trading, creditor-defeating dispositions, and failure to meet director duties. For advice on director liability during and after a company collapse, contact our director dispute lawyers Brisbane at Boss Lawyers.

This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances before taking any action.