Deregistering a company: when, how, and what to watch out for

Deregistration is the formal process of removing a company from the ASIC register. Once deregistered, the company ceases to exist as a legal entity. There are two paths: voluntary deregistration initiated by the company’s members, and ASIC-initiated deregistration where ASIC removes a company that has not paid fees or lodged required documents. The two paths have different mechanics and different consequences.

Voluntary deregistration uses ASIC Form 6010. To qualify, the company must have ceased trading, have no outstanding liabilities, have less than $1,000 in assets, have paid all ASIC fees and penalties, not be a party to any legal proceedings, and have all members agreeing to the deregistration. The directors must also resolve that the company can be deregistered. Form 6010 is lodged with ASIC.

Once ASIC accepts the application it publishes a notice of the proposed deregistration on the ASIC Published Notices website, and may deregister the company two months after that notice. This window allows creditors or other interested parties to object. If no objection is made, deregistration proceeds and the company is removed from the register. If an objection is made or ASIC has reason to believe the company has outstanding obligations, deregistration is paused while the issue is resolved.

Any assets the company holds at the time of deregistration vest in ASIC. This means physical assets, bank account balances, intellectual property, and contractual rights become ASIC’s property. Recovering vested assets usually means reinstating the company, which is costly and rarely worth it for small holdings. The practical implication: clean up assets before deregistering.

On the tax side, deregistration may trigger CGT events for the company’s shareholders, particularly if shares are cancelled or assets are distributed before deregistration. Distributions of profits made before deregistration are generally taxed as dividends, not as capital, and CGT event C2 happens for shareholders when their shares end on deregistration. The ATO may also pursue any outstanding tax obligations against the directors personally if the company is unable to pay. Tax advice should always be sought before initiating deregistration. Reinstatement is often possible by application to ASIC (Form 581) under section 601AH(1); where ASIC cannot reinstate administratively, a court application under section 601AH(2) is needed. Either way it is faster and cleaner to address issues before the deregistration than after.