Company deregistration: voluntary, involuntary, and how to reinstate

A company can be deregistered in two ways: voluntarily by its members under section 601AA of the Corporations Act, or involuntarily by ASIC under section 601AB. Understanding both processes is important because deregistration has significant legal and financial consequences that many directors do not fully appreciate until it’s too late.

Voluntary deregistration is available if all of the following conditions are met: all members agree to the deregistration, the company is not carrying on business, the company’s assets are worth less than $1,000, the company has no outstanding liabilities, the company is not a party to any legal proceedings, and all fees and penalties payable to ASIC have been paid. The application is lodged using ASIC Form 6010. ASIC publishes a notice on the ASIC Published Notices website giving two months for any person to object before deregistration takes effect.

Involuntary deregistration is what happens when compliance fails. ASIC initiates the process typically because the annual review fee has been unpaid for 12 months or more after the due date, or because the company has not lodged any documents in 18 months and ASIC has no reason to believe it is carrying on business. ASIC sends a notice to the company’s registered office (and to the registered agent if one is appointed) giving two months to show cause why the company should not be deregistered. If the company does not respond, ASIC publishes a notice on the ASIC Published Notices website and can deregister the company two months after that notice.

Once deregistered, the company ceases to exist as a legal entity. All property of the company vests in ASIC under section 601AD. Outstanding debts and liabilities are not extinguished; they continue to exist, but the company cannot be sued and cannot enforce its own contracts. The company name becomes available for other entities to register. The ABN and GST registration should be cancelled with the ATO, and all tax lodgements finalised, before applying. Any contracts in the company’s name become unenforceable by the company. Directors can still face director penalty notices for unpaid PAYG withholding, GST and superannuation, and claims under personal guarantees. An insolvent trading claim would need the company to be reinstated and wound up first.

For creditors, employees, and other stakeholders, involuntary deregistration can create serious practical problems. Bank accounts are frozen. Lease agreements become unenforceable. Employees may be unable to claim entitlements from the company. Insurance cover may lapse, although a person may still be able to recover directly from the company’s insurer under section 601AG. The practical consequences often extend far beyond the immediate compliance failure that triggered the deregistration.

Former directors, secretaries and members can often apply to ASIC to reinstate the company under section 601AH(1) using Form 581, paying an application fee plus outstanding and backdated annual review fees. Where ASIC cannot reinstate administratively (for example, the company was in liquidation or will have no directors), a court application under section 601AH(2) is needed. In a court application the applicant must demonstrate a reason for reinstatement that the court considers just, commonly to pursue or defend legal proceedings, recover property that has vested in ASIC, rectify a compliance oversight, or maintain a company name. The court may impose conditions on reinstatement, including payment of all outstanding ASIC fees and penalties, appointment of a liquidator, or lodgement of overdue returns.

Court applications typically cost $3,000 to $10,000 or more in legal fees and filing costs, plus all outstanding ASIC annual review fees and late fees must be paid. The process can take weeks to months depending on the court’s schedule and the complexity of the application. Prevention through proper compliance management is significantly cheaper than cure.

At CoSec Partners, we assist with both voluntary deregistrations (preparing all required documentation and lodging the Form 6010) and with preventing involuntary deregistrations by managing ongoing ASIC compliance. If you have a client facing potential deregistration due to unpaid fees or overdue lodgements, contact us. We can often resolve the situation before ASIC proceeds to deregister.