Wind-up notice: what you need to know
Facing a wind-up notice can feel overwhelming. You’re not alone. At AVA Advisory, we specialise in helping small and medium businesses reignite their financial futures, even when facing serious challenges.
Our corporate restructuring experts understand both the financial pressures and emotional toll these situations create. We’re here to guide you through this difficult time with genuine support and practical solutions.
What to do if you’ve received a wind-up notice
Receiving a wind-up notice from the Australian Taxation Office (ATO) or another creditor is a crucial moment for your business. This formal notice indicates the creditor wants to wind-up your company due to unpaid debts.
You have just 21 days to respond and it’s important to act quickly. The notice specifies a Court date and if you miss it, your company could face forced liquidation.
We’ll help you understand what’s happening, explore your options and take strategic action to protect both you and your business. With the right expertise, this moment can become a turning point rather than the end of your business journey.
How AVA Advisory can help
At AVA Advisory, we understand both the technical challenges and emotional impact of facing a wind-up notice. Our experienced team provides compassionate, practical guidance to help you navigate this difficult time and work toward reigniting your financial future.
Urgent financial assessment
We’ll conduct a rapid, thorough review of your company’s financial position to determine solvency status and evaluate the validity of the claimed debt. This creates clarity in a confusing situation.
Strategic response planning
Based on your unique circumstances, we’ll develop a tailored strategy that may include creditor negotiations, helping you challenge the wind-up notice or structured approaches like Small Business Restructuring to create the best possible outcome.
Legal representation
When needed, we arrange expert legal representation to oppose the winding-up application in Court by filing and serving a notice opposing the wind-up notice. You won’t face these complex proceedings alone.
Insolvency procedure management
If winding-up becomes unavoidable, we’ll guide you through the process, ensuring legal compliance.
Why are winding-up notices increasing?
The surge in winding-up notices has created unprecedent pressure on Australian businesses. This isn’t just a statistic. It represents thousands of business owners facing sleepless nights and tremendous stress. Several factors are contributing to this trend:
Post-COVID recovery
The ATO and creditors are now pursuing debts after a period of leniency during the pandemic.
Legacy debts
Many businesses still struggle with debts accumulated during and before COVID-19.
Economic pressures
Rising costs, inflation and reduced consumer spending have created perfect storm conditions.
This challenging environment doesn’t mean your situation is hopeless. At AVA Advisory, we’ve helped many businesses transform financial crises into opportunities for restructuring and renewal. We believe in second chances and know that with timely intervention, your business can still find a path forward.
businesses placed into liquidation by the Court in FY2023-24
Compared to 1,275 the previous financial year
businesses placed into external administration in FY2023-24
The highest recorded level in 25 years
Why are winding-up notices increasing?
The surge in winding-up notices has created unprecedent pressure on Australian businesses. This isn’t just a statistic. It represents thousands of business owners facing sleepless nights and tremendous stress. Several factors are contributing to this trend:
Post-COVID recovery
The ATO and creditors are now pursuing debts after a period of leniency during the pandemic.
Legacy debts
Many businesses still struggle with debts accumulated during and before COVID-19.
Economic pressures
Rising costs, inflation and reduced consumer spending have created perfect storm conditions.
This challenging environment doesn’t mean your situation is hopeless. At AVA Advisory, we’ve helped many businesses transform financial crises into opportunities for restructuring and renewal. We believe in second chances and know that with timely intervention, your business can still find a path forward.
businesses placed into liquidation by the Court in FY2023-24
Compared to 1,275 the previous financial year
businesses placed into external administration in FY2023-24
The highest recorded level in 25 years
What is a winding-up notice?
A wind-up notice is where a creditor applies to the Court to have your business placed into liquidation due to unpaid debts. Though it may feel sudden, it usually follows a series of escalating debt collection and warnings that may have gone unaddressed.
Once served, you usually have 21-28 days before your first Court hearing. This window is crucial. It’s your opportunity to demonstrate you can address your debts and potentially save your business.
Many business owners feel shame or anxiety when receiving these notices. We believe that financial challenges don’t define your worth as a business owner. What matters now is taking prompt, strategic action.
What is a Director Penalty Notice (DPN)?
A DPN is a formal notice issued by the ATO, holding directors personally liable for unpaid company tax obligations. These obligations may include:
A DPN is a formal notice issued by the ATO, holding directors personally liable for unpaid company tax obligations. These obligations may include:
Pay As You Go (PAYG) Withholding
Superannuation Guarantee Charge (SGC)
Goods and Services Tax (GST)
The DPN outlines the unpaid debt and actions required to avoid personal liability.
Types of DPNs: Which have you received?
The ATO issues two types of DPNs, each with specific implications:
21-day DPN (Traditional or Non-lockdown DPN)
Issued when tax debts are overdue but have been reported to the ATO within three months of the due date.
Directors have 21 days to act, with options such as:
Paying the debt in full.
Placing the company into liquidation or Voluntary Administration (VA).
Appointing a Small Business Restructuring Practitioner (SBRP), if total debts are under $1 million.
Directors have 21 days to act, with options such as:
Lockdown DPN
Issued when tax debts remain unreported or unpaid for over three months past the due date.
Directors are immediately personally liable for the debt, with no option to appoint administrators or liquidators to avoid liability.
Key Difference
A 21-day DPN provides time to act, while a Lockdown DPN imposes immediate personal liability.
How do wind-up notices differ from Director Penalty Notices?
Winding-up notices and Director Penalty Notices (DPNs) create different types of pressure on your business and you personally.
Wind-up notices come from creditors (including the ATO) when your company owes more than $2,000. They act as a “test of solvency” and give you 21-28 days to respond before a Court hearing. These notices appear publicly on the ASIC website and may lead to Court-ordered liquidation if not properly addressed.
DPNs come directly from the ATO to you as a company director. They hold you personally responsible for unpaid company taxes and superannuation. While they don’t necessarily trigger liquidation, they create serious personal financial risk.
Key differences between a winding-up notice and a Director Penalty Notice (DPN)
Target
Winding-up notices affect your company. DPNs target you personally as a director.
Issuer
Any creditor can issue winding-up notices. Only the ATO issues DPNs.
Outcome
Winding-up notices potentially lead to company liquidation. DPNs create personal liability.
Options
Winding-up notices allow for debt payment or dispute. DPNs require specific actions to avoid personal liability.
What should you do after receiving a winding-up notice?
Receiving a wind-up notice can trigger intense emotions – fear, stress and shame. These feelings are natural. With prompt, strategic steps, you can still influence the outcome and potentially create a path toward business renewal.
Step 01
Immediate assessment
Conduct an urgent review of your company’s financial position and verify the debt claimed in the notice. This identifies all your options and must happen quickly. Our corporate advisory team can help ease this sudden burden by providing expert assessment.
Step 02
Seek professional advice
Connect with an insolvency practitioner immediate. Their expertise is vital for navigating all available paths forward. The right advice now can make all the difference to the outcome for your business.
Step 03
Strategic response
Based on the assessment and professional advice, implement the best strategy for your situation. The AVA Advisory team can help you implement the best strategy for your specific circumstances.
Why ignoring a winding-up notice isn’t an option
Ignoring a winding-up notice can result in severe consequences that can affect both your business and personal wellbeing.
Automatic liquidation
Without response, the Court can place your company into liquidation. This means losing control of your business entirely.
Reputation damage
Once filed, a winding-up notice becomes public on the ASIC Insolvency Notices website, potentially affecting relationships with suppliers, customers and partners.
Operational paralysis
Once a winding-up application has been presented, your bank may freeze your business accounts, making it impossible to pay staff, suppliers or continue trading.
Personal liability for directors
As a director, you may face personal claims for insolvent trading or breach of duties, potentially leading to financial penalties or disqualification.
As a former director, can you be affected by a wind-up notice?
Even after stepping down as a director, you’re not automatically free from garnishee notice implications. The ATO can still hold you responsible for:
- PAYG withholding
- Superannuation Guarantee Charge
- Net GST liabilities
These responsibilities cover reporting periods that begun during your directorship.
If you learn of a garnishee notice affecting a company where you were previously a director, seek immediate advice to understand your position.
How AVA Advisory can help
At AVA Advisory, we understand both the technical challenges and emotional impact of facing a wind-up notice. Our experienced team provides compassionate, practical guidance to help you navigate this difficult time and work toward reigniting your financial future.
Urgent financial assessment
We’ll conduct a rapid, thorough review of your company’s financial position to determine solvency status and evaluate the validity of the claimed debt. This creates clarity in a confusing situation.
Strategic response planning
Based on your unique circumstances, we’ll develop a tailored strategy that may include creditor negotiations, helping you challenge the wind-up notice or structured approaches like Small Business Restructuring to create the best possible outcome.
Legal representation
When needed, we arrange expert legal representation to oppose the winding-up application in Court by filing and serving a notice opposing the wind-up notice. You won’t face these complex proceedings alone.
Insolvency procedure management
If winding-up becomes unavoidable, we’ll guide you through the process, ensuring legal compliance.
FAQs
Find answers to common questions about winding-up notices.
You typically have 21 days from receiving the notice to respond before the first Court hearing date. Acting within this window gives you more options.
You have several options:
- Pay the debt in full
- Enter a payment arrangement
- Apply to set aside the wind-up notice
- Consider Voluntary Administration
- Consider Small Business Restructuring (for eligible businesses)
We recommend you seek corporate insolvency advice immediately after receiving a notice to determine your best path forward.
While you aren’t legally required to stop trading immediately, you should exercise caution about continuing operations. Consider your ability to repay debts and your legal obligations around insolvent trading. There’s also a risk that your business’s bank will freeze your accounts, which makes trading difficult.
If you don’t take appropriate action before the specified Court date, the Court will likely place your company into liquidation, removing your control over the business.
Any creditor, including the ATO, can issue a winding-up notice when your company has failed to pay debts exceeding $2,000.
Once filed, the notice appears on the ASIC website’s insolvency notices page, potentially damaging your business’s creditor rating and reputation with stakeholders.
Yes, you can apply to have a notice set aside, but you need to act quickly and must have valid grounds, such as a genuine dispute about the debt or evidence of solvency.
If wound up, control of your business transfers from you to a Court-appointed liquidator, who will sell the company assets and distribute proceeds to creditors according to statutory priorities.
Still have questions?
Get in touch for more information.
Join us on the journey to resilience
At AVA Advisory, we believe that every business deserves the chance to not just survive but thrive. Our team is here to provide the expert guidance, personalised solutions, and empathetic support you need to overcome financial challenges and achieve long-term success. Whether you’re facing insolvency, struggling with debt, or looking for ways to improve your financial management, we’re here to help.
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Reach out to our friendly team for an obligation-free, cost-free consultation. Share details of your situation and concerns in confidence. Clarity, relief, and a brighter future for you and your business are only a few steps away.
