A company entering into Liquidation does not necessarily bring a contract to an end. In order to remove any obligation with regards to the property by the Liquidator it is necessary for a disclaimer to be lodged.
A disclaimer is a formal notice that has the effect of removing all responsibility from the Liquidator for the property disclaimed and discharges all personal liability in respect of it.
Based on Section 568 of the Corporations Act 2001 (“the Act”), a Liquidator of a company may at any time, on the company’s behalf, disclaim property of the company that consists of:
- land burdened with onerous covenants; or
- shares; or
- property that is unsaleable or is not readily saleable; or
- property that may give rise to a liability to pay money or some other onerous obligation; or
- property where it is reasonable to expect that the costs, charges and expenses that would be incurred in realising the property would exceed the proceeds of realising the property; or
- a contract.
To disclaim property, a Liquidator will complete a Form 525 and lodge it with Australian Securities Investment Commission (“ASIC”) and advise any interested parties of the disclaimer.
Once the disclaimer is lodged with ASIC, any interested parties can set the disclaimer aside by applying to the Court within fourteen (14) days of the following:
- Liquidator giving notice to the interested party; or
- the disclaimer being published in accordance with subsection 568(2) of the act; or
- when the Liquidator lodges notice of the disclaimer.
Liquidators are said to be increasingly disclaiming properties. Prior to disclaiming property they need to ensure that there would be no benefit in the property and to determine the potential repercussions of issuing the disclaimer.