Breaking free: benefits and steps for voluntary company deregistration
When starting a business, the thought of voluntarily deregistering it may be far from the minds of most entrepreneurs.
However, circumstances may arise where voluntarily deregistering your company becomes the best option.
This can happen due to a variety of reasons, such as changes in the market or your circumstances.
Voluntary deregistration can be a daunting process, but it can also offer several benefits, such as reducing the stress and ongoing compliance costs of conducting business as well as simplifying the company’s structure.
Read on as we explore the process of voluntarily deregistering a company in Australia, the eligibility criteria, and the effects it can have on a business.
As a bonus, we’ll also look at the steps that can be taken to ensure a smooth and successful deregistration process to relieve some of the strain.
What Is Voluntary Deregistration?
Voluntary deregistration refers to the process by which a company or entity decides to cancel its registration with a particular regulatory body or government agency.
This decision is typically made when the company or entity no longer requires the services or benefits that come with registration, or when it is ceasing operations altogether.
Some of the benefits of a deregistered company can include reduced regulatory compliance costs and administrative burdens, as well as the ability to avoid ongoing reporting and disclosure requirements.
However, it is important for companies and entities to carefully consider the potential implications of deregistration, including the loss of legal protections and the potential impact on stakeholders such as employees and shareholders.
Voluntary company deregistration eligibility
Are you eligible to deregister a company?
In Australia, the eligibility requirements for voluntary company deregistration are outlined in the Corporations Act 2001.
The following criteria must generally be met:
1. All outstanding liabilities must be paid
The company must have paid all outstanding debts, taxes, and other obligations owed to creditors, employees, and regulatory bodies.
2. No legal proceedings against the company
The company must not be the subject of any legal proceedings, including any pending or threatened lawsuits, arbitration, or regulatory investigations.
3. All shareholder and director approval must be obtained
The decision to deregister a company must be approved by a majority of shareholders, and all directors must consent to the deregistration.
4. The company must not be carrying on business or operations
The company must have ceased all business activities and disposed of all assets and liabilities.
5. The company must not be a party to any agreements
The company must not have any outstanding agreements, contracts, or leases that may prevent its deregistration.
6. The company must not have any outstanding fees or penalties
The company must have paid all outstanding fees and penalties to the Australian Securities and Investments Commission (ASIC).
How do you voluntarily deregister a company?
Now that your company meets the eligibility for voluntary company deregistration, let’s look at how you get started.
There are quite a few steps to follow, so hold on tight, or Sleek accountants can help you through the process to ensure you follow the process and relieve the stress.
Let’s begin –
Step 1. Check the eligibility
Ensure that the company meets the eligibility criteria for voluntary deregistration, as outlined in the Corporations Act 2001 (Cth).
Step 2. Hold a meeting of shareholders and directors
Obtain approval for the voluntary deregistration from the shareholders and directors of the company.
Step 3. Finalise the company’s affairs
Wind up your company’s affairs, including disposing of the company’s assets and company property, closing company bank accounts, paying all outstanding liabilities such as creditors and taxes, annual review fee, unpaid employee entitlements, and resolving any outstanding legal issues.
Step 4. Notify the Australian Securities and Investments Commission (ASIC)
Inform the ASIC of your intention to deregister the company, using Form 6010 (available on the ASIC website).
Step 5. Apply for deregistration
Prepare and lodge an application for deregistration with the ASIC, using Form 6010. The application must include your company’s ABN, ACN, and other details, as well as a declaration that your company meets the eligibility criteria for deregistration.
Step 6. Pay the fees and penalties payable
Pay the ASIC application fee for deregistration, which is currently $42 (as of March 2023).
Step 7. Wait for the ASIC to process the application
The ASIC will review the application and, if approved, issue a notice of deregistration.
Step 8. Notify other relevant agencies
Notify other agencies of the deregistration, such as the Australian Taxation Office (ATO), the Australian Business Register (ABR), and any state or territory regulatory bodies.
Step 9. Finalise the deregistration
Once your company’s notice of deregistration is received from the ASIC, ensure that it is removed from all relevant registers and databases and that any remaining assets are distributed to shareholders or otherwise dealt with following the company’s constitution.
The process for voluntary deregistration can be complex and may require financial professionals or legal assistance. Therefore, it is advisable to seek professional advice before initiating the deregistration process.
What are the effects of deregistration of a company?
It’s a big thing to deregister a company.
Before you start deregistering your company in Australia there are several effects of deregistration you should be made aware of.
Cessation of legal existence: A deregistered company ceases to exist as a separate legal entity. This means that it can no longer enter into contracts or conduct any business operations.
Termination of liability: Deregistering a company terminates the liability of its shareholders for any outstanding debts or obligations, except for any debts incurred before the deregistration.
Removal from public records: Deregistering a company removes it from public records, including the Australian Securities and Investments Commission (ASIC) database and the Australian Business Register (ABR).
Cancellation of licenses and permits: Voluntarily deregister may result in the cancellation of any licenses or permits held by the company, such as business licenses or tax registrations.
Loss of protection for the company name: Deregistering a company may result in the loss of protection for the company name, which may allow other entities to use the name.
Limitations on legal action: Once a company is deregistered, legal action against it may be limited, as it no longer exists as a legal entity.
Sleek’s tips for a smooth company deregistration
As always, Sleek is here for you.
We’ve included some tips to help you as you voluntarily deregister your company:
- Seek professional advice
Before initiating the deregistration process, it’s essential to seek professional advice from a qualified accountant or lawyer. They can guide you through the process and help ensure that you meet all the eligibility criteria.
- Ensure all obligations are met
Make sure that all tax returns, outstanding debts, and other financial obligations are paid before initiating the deregistration process. Failing to do so could lead to delays or complications.
- Inform stakeholders
It’s important to inform all stakeholders, including employees, customers, suppliers, and creditors, of the company’s impending deregistration and the reasons behind it.
- Cancel any licenses and permits
Cancel any licenses and permits held by the company, such as business licenses, tax registrations, or permits for specific activities. This includes registered business names.
- Lodge the required forms
Lodge the appropriate forms with ASIC, including the Application for Voluntary Deregistration and the final tax return, if applicable.
- Check the company’s name protection
Check if the company name is protected under trademark law, and if so, seek legal advice to ensure that the name is not being used by others.
- Keep records
Keep accurate records of all the steps taken during the deregistration process, as these may be required in the future.
Company deregistration is not a decision that should be taken lightly, but it can be the right choice for a business in certain circumstances. With proper planning and some help from Sleek, voluntary deregistration can be a positive step toward the future success of your business.
Call us today on +61 2 9100 0480 or use our chatbox to start the conversation.
3 common mistakes soles traders make with their Australian ABN
Sleek works with many sole traders just like you and we don’t want to see you make the same errors with your ABN.
Here’s our top ABN errors to avoid –
Not keeping your ABN details up to date
Moved your business to another office or warehouse or changed your business name? You must notify the ABR if there are any changes to your business name, address, postal address, or business contact details.
As a sole trader business you are required to keep your ABN details up to date ABR. Failing to update these details can result in missed communication from the ABR and other government agencies.
Not registering for GST when required
Keep an eye out on your turnover.
If your business has a turnover of $75,000 or more per year, you must register for GST. Failing to register for GST when required can result in penalties and interest charges.
Consider the nature of your business activities
Before you apply for an ABN as a sole trader, consider the nature of your business activities. If you operate in the same or similar trades as a previous business you owned or operated, disclose this information to the ATO.
Using your ABN for personal expenses
Only use your ABN for business-related expenses.
Using your ABN for personal expenses can lead to confusion and errors on your tax return.
Lastly, don’t forget, it is an ABN requirement to put your ABN number on all tax invoices.
It’s important to understand your obligations as a sole trader and take the necessary steps to ensure you are legally responsible. If you need help with your ABN application, call Sleek now on +61 2 9100 0480 or use our chatbox to ask a quick question.
Find out more about starting your own sole trader business –
How to choose a business name – The dos and don’ts
How to create a business plan – A business plan helps you clarify your business concept, allows you to anticipate potential challenges and develop a roadmap for achieving your objectives.