Liquidation

Liquidation is a formal process initiated when a company can no longer pay its debts. A liquidator, a trained professional, is appointed to take charge of the company. Their job is to sell the company's assets, like property, equipment, and inventory, to pay off debts. This process leads to the closure of the company. Liquidation is often a last resort and indicates the company is insolvent, meaning it can't cover its debts.

What liquidation means for employees

When a company goes into liquidation, the liquidator usually ends employees' employment unless the business is to be sold or kept trading for a while. Employees owed wages, superannuation, leave and redundancy pay are priority creditors and are paid before most other unsecured creditors. If there is not enough money, the Fair Entitlements Guarantee may pay some entitlements, but not superannuation. For example, an employee owed 4 weeks' wages and unused annual leave can lodge a proof of debt with the liquidator and, if needed, a Fair Entitlements Guarantee claim.

Read our guide to redundancy pay.