Voluntary winding up
Learn the steps for a voluntary winding up of a co-operative, including appointing a liquidator, disclosure statements, and special postal ballots.
A co-operative's voluntary winding up requires a liquidator. The liquidator will manage the process and finalise the co-operative's affairs.
The co-operative exists as a legal entity until the process is complete.
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.
Once a liquidator is appointed, the co-operative must cease operations. The directors' powers also cease, except as approved by the liquidator.
Steps for a voluntary winding up
Disclosure statement
Submit a draft disclosure statement and the fee to the Registrar for approval. Do this at least 28 days before the date members will be notified of the special postal ballot.
An example of a disclosure statement for voluntary winding up is available.
Alternatively, you can obtain legal advice on drafting your own disclosure statement.
Declaration of solvency
A majority of the directors must make a declaration in writing that they believe the co-operative can pay its debts. The declaration must also say the debts can be paid in full within 12 months after the start of the voluntary winding up.
The Declaration of Solvency is made on ASIC Form 520 (with appropriate changes). It must be lodged with NSW Fair Trading before the disclosure statement and ballot papers are sent to 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 right away.
Special postal ballot
The winding up proposal is put to members in a special postal ballot. This is only done after the Registrar approves the disclosure statement.
The special postal ballot must be held in accordance with:
- regulation 3.9 of the Co-operatives National Regulations
- the co-operative’s rules.
If three-quarters of the formal votes cast in the special ballot are in favour of the proposal, the special resolution passes. However, the co-operative's rules (section 239 of the Co-operatives National Law (CNL) may require a higher percentage.
Upon declaring the result, the co-operative's secretary must record 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 exempt a co-operative from holding a special postal ballot in special cases. An exemption application must be written and submitted to NSW Fair Trading, along with the disclosure statement. It must include the applicable fee.
Registration of the special resolution
If the special resolution is passed, it must be registered with NSW Fair Trading:
- within 7 days of it being passed
- by lodging a Form C10 Application to register rule amendment, and
- be accompanied by the applicable fee.
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 (Commonwealth). On appointing a liquidator, the directors' powers cease. This is unless the liquidator approves continuing any of those powers.
The liquidator must lodge a notice of appointment with the Registrar. All reports and forms (with changes) required by the Corporations Act must be lodged with NSW Fair Trading.