The voluntary winding up of a co-operative requires the appointment of a liquidator to manage the winding up process and finalise the co-operative’s affairs.
The co-operative remains in existence as a legal entity until the process is completed.
A voluntary winding up by members must be approved by members in a special postal ballot. The liquidator can be appointed by a simple majority in the same postal ballot.
On the appointment of a liquidator, the co-operative ceases to carry on business and all the powers of the directors cease, except as approved by the liquidator.
Steps for a voluntary winding up
1. Disclosure statement
A draft disclosure statement together with the applicable fee must be submitted to the Registrar for approval at least 28 days before the date you intend to give members notice of the special postal ballot.
An example of a disclosure statement for voluntary winding up (PDF, 546.48 KB) is available.
Alternatively, you can obtain legal advice on drafting your own disclosure statement.
2. Declaration of solvency
The majority of the directors must declare in writing they have formed the opinion that the co-operative will be able to pay its debts in full within 12 months of the commencement of the voluntary winding up.
The Declaration of Solvency is made on ASIC Form 520 (with appropriate changes). The Declaration of Solvency must be lodged with Fair Trading before the date on which the disclosure statement and ballot papers are sent to the members. The special resolution must be passed within 5 weeks of the date the Declaration of Solvency is made.
Important: It is an offence for a director to make a false Declaration of Solvency. If a declaration of solvency cannot be made, the co-operative should seek professional advice as soon as possible.
3. Special postal ballot
After the Disclosure statement is approved by the Registrar, the winding up proposal is put to members in a special postal ballot. The special postal ballot must be held in accordance with:
- regulation 3.9 of the Co-operatives National Regulations; and
- the co-operative’s rules
The special resolution to approve the winding up will be passed if, three-quarters of the formal votes cast in the special postal ballot, are in favour of the proposal. A higher percentage may be required by the rules of the co-operative (s.239 of the CNL).
As soon as the result is declared, the secretary of the co-operative must make an entry in the co-operative’s minutes showing the number of:
- formal votes in favour of the winding up
- formal votes against the winding up
- informal votes cast.
The winding up commences when the result of the special postal ballot is noted in the minutes.
The Registrar can, in appropriate circumstances, exempt a co-operative from the requirement to hold a special postal ballot. An application for exemption must be made in writing at the time the disclosure statement is submitted to Fair Trading and must be accompanied by the applicable fee.
4. Registration of the special resolution
If the special resolution is passed, it must be registered with Fair Trading:
- within 7 days of it being passed;
- by lodging an Application to register rule amendment/special resolution (form C10) (PDF, 835.88 KB); and
- be accompanied by the applicable fee
5. The liquidator winds up the co-operative’s affairs
A simple majority vote is required to appoint a liquidator. The liquidator’s appointment and activities are governed by the Corporations Act 2001. On the appointment of a liquidator, all the powers of the directors cease except where the liquidator approves the continuance of any of those powers.
The liquidator must lodge a notice of appointment with the Registrar. All reports and forms (with appropriate modifications) required to be provided by the applied provisions of the Corporations Act 2001 must be lodged with NSW Fair Trading.
For further information please contact:
PO Box 22
Bathurst NSW 2795
Tel: 02 6333 1400
Freecall: 1800 502 042