Company deregistration — the removal of a company from ASIC's register — is distinct from liquidation. A company can be deregistered for failing to lodge annual returns or pay fees (administrative deregistration by ASIC), or it can be deregistered following the completion of a winding up. In either case, the company ceases to exist as a legal entity, and its property vests in ASIC as unclaimed property.
When a company that owes you money is deregistered, the debt does not disappear — but recovering it requires dealing with the deregistration first.
Reinstatement: the primary pathway
Under section 601AH of the Corporations Act 2001 (Cth), ASIC can reinstate a deregistered company — either on its own initiative or on the application of a "person aggrieved" by the deregistration. A creditor of the deregistered company is a person aggrieved for this purpose. A court can also order reinstatement on a similar application.
Reinstatement restores the company to its pre-deregistration state. Once reinstated, the company is again a legal entity capable of being sued. The property that vested in ASIC on deregistration is returned to the company.
The reinstatement application
An application to ASIC for administrative reinstatement requires: the form and fee (currently around $500–$1,000 depending on the type of application); consent of the directors who were in office at the time of deregistration (or court order); and evidence that the company was carrying on business at the time of deregistration and has outstanding liabilities.
The alternative — applying to the court for reinstatement — is used where ASIC declines to reinstate administratively or where there is a dispute about the reinstatement. Court applications are more expensive but give greater certainty.
Once reinstated: suing the reinstated company
After reinstatement, the creditor can sue the reinstated company in the normal way. However, if the company has no assets — if it was deregistered because it was insolvent and asset-free — obtaining a judgment against the reinstated company may produce nothing recoverable. The practical question before investing in reinstatement is whether the company had, or is likely to have, any assets that can satisfy the debt.
Pursuing the directors
If the company was deregistered after trading while insolvent, the directors may be personally liable for insolvent trading. This claim would be brought by a liquidator appointed following reinstatement. For this reason, some creditors reinstate a company specifically to appoint a liquidator and have the liquidator investigate and pursue director liability.
Is it worth it
The cost-benefit of reinstatement depends entirely on the amount of the debt and the likely asset position of the company or its directors. For small debts, reinstatement is usually not economically justified. For significant debts, particularly where director misconduct is suspected, reinstatement and subsequent liquidation may be the most effective recovery pathway.
Contact Merion if your debtor is a deregistered company — we can advise on whether reinstatement and subsequent recovery makes commercial sense in your circumstances.