Ending your organisation

On this page

• Solvent and insolvent CLGs
• Ending a solvent CLG
• Responding to an insolvent CLG
• Consequences of ending a CLG
• Guide to ending a CLG

A company limited by guarantee (CLG) may end voluntarily or may be required to end. The process depends principally on whether the CLG is solvent or insolvent.

Solvent and insolvent CLGs

Under the Corporations Act 2001 (Cth), a CLG is solvent if it can pay all its debts as and when they become due and payable. A CLG that cannot do so is insolvent.

Determining whether a CLG is insolvent is not always straightforward. A temporary shortage of cash does not necessarily mean a CLG is insolvent, and having assets that exceed liabilities does not necessarily mean it is solvent. The CLG’s overall financial position must be considered.

Warning signs of insolvency may include:

• ongoing losses or poor cash flow
• overdue tax or superannuation liabilities
• creditors remaining unpaid outside normal trading terms
• difficulty obtaining finance
• suppliers requiring cash on delivery
• incomplete financial records or a lack of cash flow forecasts, and
• relying on the next major grant, contract, fundraising campaign or sale to resolve financial difficulties

This is not an exhaustive list.

Ending a solvent CLG

There are two main ways to end a solvent CLG:

• voluntary deregistration, and
• members’ voluntary winding up

Voluntary deregistration

An eligible CLG may apply to the Australian Securities and Investments Commission (ASIC) for voluntary deregistration instead of going through a formal winding up process.

Voluntary deregistration is generally the simpler and less costly option. However, a CLG is only eligible if it:

• has the agreement of all members
• is no longer conducting business or carrying out activities
• has assets worth less than $1,000
• has paid all ASIC fees and penalties
• has no outstanding liabilities, including employee entitlements, and
• is not involved in legal proceedings

The CLG should also finalise its tax and superannuation obligations and deal with all property, accounts, registrations, licences and other assets before applying.

Even if a CLG has stopped operating, it must continue to meet its legal obligations while it remains registered with ASIC.

Members’ voluntary winding up

If a solvent CLG does not qualify for voluntary deregistration, it may need to use a members’ voluntary winding up.

A majority of directors must make a declaration that they believe the CLG can pay all its debts in full within 12 months after the winding up begins. The members must then pass a special resolution and appoint a registered liquidator.

The liquidator takes control of the CLG, realises its assets, pays its liabilities and distributes any remaining funds or assets in accordance with the law and the CLG’s governing documents. ASIC deregisters the CLG after the winding up is completed.

Responding to an insolvent CLG

Financial difficulty and insolvency are serious matters. Acting early may improve the prospects of the CLG continuing to operate and help directors comply with their legal duties.

Directors must keep informed about the CLG’s financial position and consider whether it can pay its debts before approving new transactions, contracts or liabilities. This responsibility applies to every director, not only the treasurer or directors with financial expertise.

Depending on the CLG’s circumstances, options may include:

• small business restructuring
• voluntary administration
• creditors’ voluntary winding up
• simplified liquidation, or
• compulsory winding up by a court

The appropriate option will depend on the CLG’s financial position, liabilities, assets and prospects of continuing to operate.

Small business restructuring

Small business restructuring allows an eligible insolvent CLG to propose a restructuring plan to creditors while the directors remain in control of its business, property and affairs.

A small business restructuring practitioner oversees the process. Strict eligibility requirements apply, including a maximum of $1 million in liabilities and requirements relating to employee entitlements and tax lodgements.

Voluntary administration

Voluntary administration allows an administrator to investigate the CLG’s financial position and report to creditors.

During this process, creditors generally decide whether:

• control of the CLG should return to the directors
• the CLG should enter into a deed of company arrangement (DOCA), or
• the CLG should be wound up

A DOCA is a binding agreement between the CLG and its creditors dealing with how the CLG’s affairs will be managed. It may allow the CLG to continue operating.

Creditors’ voluntary winding up

The members of an insolvent CLG may resolve to place it into creditors’ voluntary winding up before a creditor applies for a court order.

A registered liquidator takes control of the CLG, investigates its affairs, realises its assets and distributes available funds in accordance with the Corporations Act.

Simplified liquidation

Simplified liquidation is a streamlined form of creditors’ voluntary liquidation for eligible companies with liabilities of no more than $1 million.

It can only be used after the CLG enters creditors’ voluntary winding up. Strict eligibility requirements apply.

Compulsory winding up

A court may order that a CLG be wound up. Insolvency is the most common basis for an application.

A creditor owed at least $4,000 may serve a statutory demand requiring the CLG to pay the debt within 21 days. If the CLG does not comply with the demand or successfully apply to have it set aside within that period, it may be presumed insolvent.

Directors’ duties during financial difficulty

Directors must not allow a CLG to trade while insolvent. A director who breaches the insolvent trading provisions may face civil penalties, compensation proceedings or criminal charges.

Directors and officers must also not cause a CLG to make a creditor-defeating disposition. This may occur where company property is transferred for substantially less than its market value in a way that prevents, hinders or significantly delays the property from becoming available to creditors.

A CLG must keep financial records that correctly record and explain its transactions, financial position and performance. Without current and reliable records, directors may be unable to assess whether the CLG can pay its debts when they fall due.

Consequences of ending a CLG

Distribution of assets

Funding agreements may contain requirements for dealing with funded assets or unspent grant money when a CLG ends. Government-supplied property may need to be returned to the relevant agency or transferred to a nominated organisation.

During a liquidation, the liquidator realises the CLG’s assets and distributes available funds in the order required by the Corporations Act.

If assets remain after the CLG’s debts, liabilities and winding up costs have been paid, they must be distributed in accordance with the CLG’s constitution and any charity or deductible gift recipient requirements.

Consequences for directors, members, creditors and employees

When a CLG enters liquidation:

• control of the CLG passes to the liquidator
• directors can no longer manage the CLG or deal with its property
• creditors may receive all, part or none of the money owed to them, depending on the available assets
• employees generally lose their employment, and
• members are generally not entitled to share in surplus assets unless permitted by the constitution and applicable law

Eligible employees may be able to obtain assistance under the Fair Entitlements Guarantee (FEG) scheme if the CLG cannot pay their entitlements. FEG is a legislative safety-net scheme that provides financial assistance to eligible employees whose employment ends because of the liquidation of their employer.

Administrative matters

After the CLG has been wound up or deregistered, it may also be necessary to:

• cancel its Australian Business Number and associated tax registrations
• apply to revoke any registration with the Australian Charities and Not-for-profits Commission
• deal with records in accordance with applicable retention requirements, and
• cancel or transfer licences, registrations and business names

Reinstatement

A deregistered CLG may be reinstated in limited circumstances by ASIC or by court order.

Guide to ending a CLG

Our guide sets out the options and processes for ending a CLG and covers:

• when a CLG is insolvent
• directors’ duties during financial difficulty
• voluntary deregistration and members’ voluntary winding up
• small business restructuring and voluntary administration
• creditors’ voluntary, simplified and compulsory liquidation
• choosing a liquidator or administrator
• distributing assets, and
• the consequences of ending a CLG

The content on this webpage was last updated in September 2026 and is not legal advice. See full disclaimer and copyright notice.

Apply for free legal help

Apply now