Once a company is deregistered, it legally ceases to exist. For practical purposes, this means that (among other things) creditors can no longer chase the company for any amounts they are owed, legal proceedings cannot be commenced or continued against the company, and the company can no longer legally hold any assets.
Deregistration can therefore create significant difficulties for creditors, former directors, shareholders, and others who want to pursue unresolved rights or claims against a former company.
Fortunately, the Corporations Act 2001 (Cth) (the Act) provides various mechanisms by which a deregistered company can be reinstated.
Reinstatement can occur by way of an application to the Australian Securities and Investment Commission (ASIC), or to State Supreme or Federal Courts. The appropriate pathway depends on who is seeking reinstatement, and the purpose for which it is being sought.
Reinstatement by ASIC (Administrative Reinstatement)
Section 601AH(1) of the Act permits ASIC to reinstate a deregistered company by way of an ‘administrative reinstatement.’ Standing to apply for reinstatement through ASIC is limited to a narrower class of persons closely connected the company, including:[1]
- A person who was a director, secretary or member of the company at the time of deregistration; or
- A third party who was involved in ongoing legal proceedings involving the company immediately before deregistration.
This method is commonly utilised when a company should not have been deregistered in the first place, generally as a result of some error or oversight.
Thus, applying to ASIC for administrative reinstatement is generally not suitable for creditors of a deregistered company. By way of example, this method of reinstatement would not be appropriate for a creditor who has a claim against a deregistered company, but who only became aware of that claim after the deregistration has occurred. In those circumstances, intervention by the Courts is more appropriate.
Court-Ordered Reinstatement
Where administrative reinstatement is not available or appropriate, section 601AH(2) of the Act allows a court to order that ASIC reinstate a company. Applications will generally succeed where:
- a) The application is brought by:
- i. a former liquidator of the company; or
- ii. a “person aggrieved” by the company’s deregistration; and
- b) The court is satisfied that it is just that the company’s registration be reinstated.
Person Aggrieved
The meaning of “person aggrieved” has been considered extensively in case law and is construed broadly. In Mackies Industries Australasia Pty Ltd (deregistered); National Australia Bank Ltd v ASIC [2022] FCA 147, the Federal Court affirmed that the term will capture a person who has been deprived of something, or who has suffered legal or financial injury as a result of deregistration.
In practical terms, a person will usually be considered aggrieved where deregistration has caused a real legal or financial disadvantage (for example, by preventing the enforcement a debt or other legal right).
The threshold for establishing that a person is a “person aggrieved” for the purposes of section 601AH(2) is relatively low. A detailed examination of the underlying dispute is generally unnecessary, and applications are often capable of being determined summarily (Owners of Strata Plan No 91349 v Australian Securities and Investments Commission (2020) 147 ACSR 456).
‘Just’ to Reinstate?
Even where a person or entity has standing to make an application for reinstatement, section 601AH(2) of the Act requires the Court to be satisfied that it would be ‘just’ to reinstate the deregistered company.
Courts exercise a broad discretion in determining this question. Relevant considerations (Akuna Pty Ltd (Deregistered) v Australian Securities and Investments Commission [2019] FCA 320 [28]) often include:
- i. the circumstances surrounding the company’s deregistration;
- ii. the use that might be made of the company’s reinstatement;
- iii. the prejudice any person may suffer as a result of the reinstatement; and
- iv. the broader public interest.
Accordingly, although a creditor may qualify as a person aggrieved, the court will generally require evidence of a genuine economic interest in reinstatement, and a practical reason for restoring the company to the register (Wyse & Young International Pty Ltd t/as Wyse & Young Accounting & Ors v Corrado [2015] NSWSC 1863 [43]).
The abovementioned factors, relevant to the ‘just’ inquiry, are not fixed or exhaustive. They reflect the evolving jurisprudence in this area and will be assessed in light of the particular facts of a given case (Promnitz v Australian Securities and Investments Commission [2004] FCA 22).
Reinstatement Followed by Winding Up
Where a deregistered company is insolvent, reinstatement will likely require an immediate winding-up of said company to allow for the orderly administration and distribution of any remaining assets.
Where reinstatement would immediately be followed by winding up, the applicant may need to show that:
- a) there is a realistic prospect of a distribution to creditors, and
- b) the reinstatement serves a practical and legitimate purpose.
Courts often expect an application for winding up to be filed concurrently with the reinstatement application and supported by appropriate evidence addressing the company’s financial position (Wyse & Young International Pty Ltd t/as Wyse & Young Accounting & Ors v Corrado [2015] NSWSC 1863).
Practical Considerations
ASIC’s Regulatory Guide 83 sets out key procedural considerations for reinstatement applications under section 601AH of the Act. Some key points include:
- Company name availability: If the company’s original name is no longer available, it must be reinstated using its ACN followed by “Pty Ltd” or “Ltd”.
- Notice to former directors: All directors at the time of deregistration must be notified of the application, as reinstatement restores their legal duties and responsibilities as directors of the company.
- Service on ASIC: ASIC must be served with the application and supporting material. ASIC generally does not oppose reinstatement where the formal requirements are met.
Final Thoughts
As set out above, reinstatement by court order is more appropriate for creditors and other affected parties who are placed at a real legal or financial disadvantage by a company’s deregistration. When considering any such application, the courts adopt a practical, discretionary approach and each application will turn on its own facts.
Reinstatement is rarely a standalone issue and commonly arises at the intersection of litigation, insolvency, and corporate law. Our lawyers can assist with an application for reinstatement of a deregistered company, or any other corporate or insolvency matters.
[1] See Australian Securities & Investment Commission ‘Regulatory Guide 83’.