What is a director entitled to when a company is wound-up?

The Corporations Act puts some limitations on the priority of directors’ entitlements on a winding up…

On the winding up of a company, directors and their spouses or relatives are entitled to be paid:

  • wages and superannuation; and
  • annual leave and long service leave.

However, the priority of their claim is restricted under the Corporations Act 2001 (Cth) (the Act).

The restriction arises because directors, their spouses, and their relatives are considered “excluded employees” in accordance with section 556(2) of the Act.  Excluded employees do not enjoy priority to the same extent as other employees.

In respect of wages and superannuation, each excluded employee can receive a maximum priority payment of $2,000, with any excess amount treated as “other unsecured debts and claims”.   This means that if they are owed $5,000 in unpaid wages, the remaining $3,000 will not be paid until all other priority payments and secured debts have been paid.

In respect of annual and long service leave, an excluded employee’s claim in priority is limited to a claim of up to $1,500 for both entitlements, with any excess being treated as an unsecured debt.

Each of these payments will only be paid once the higher ranking priority amounts have been paid – these include amounts such as the liquidator’s expenses and the costs of obtaining a winding-up order for the company.

For more information, please contact us on 1300 654 590.

Our Great Lawyer Guarantee

We want to be part of your team over the long term. We'll achieve this by sticking closely to the following principles:

  • We'll listen carefully to understand what you want to achieve. Then we'll thoroughly explain our advice and step you through the documents. You can be sure you'll know the full consequences.
  • Our lawyers work as a team, so someone will always be available to answer your questions, or point you in the right direction. You will also benefit from a range of perspectives and experience.
  • One of our key goals is to pass on as much knowledge as we can, so you can make your own informed decisions. We want to make you truly independent.
  • We only do what we're good at. You can be confident that we know what we're doing and won't pass on the cost of our learning.
  • For advice and documents, we provide a fixed or capped quote so you don’t take price risk. If you're in a dispute, we'll map out the process and costs so you know what to expect.
  • We're not in this game for our egos. We're in it for a front row seat to witness your success

We measure our success on how efficiently we have facilitated your objectives, enhanced your relationships, and reduced the level of stress for all involved.

If we sound like people you can work with, call us now on 1300 654 590 and speak directly with a great lawyer.

Call 1300 654 590 and speak with a lawyer

You’ll be put straight through to a great lawyer who will guide you to the right solution.

Can employers require an employee to get a COVID 19 vaccination? 

Can employers require an employee to get a COVID 19 vaccination? 

On 25 January 2021, the Pfizer COVID 19 vaccination was approved for roll-out in Australia. This raises an important question – can employers require workers to be vaccinated against COVID 19? There is no hard and fast answer yet, but we can look to recent cases involving flu vaccinations for guidance. 

read more
What is a director’s role in a members’ voluntary liquidation?

What is a director’s role in a members’ voluntary liquidation?

If you are a director and member of a company and ready to shut down your solvent business through a members’ voluntary liquidation, you may be wondering how the process looks. In particular, you may be wondering what your role will be as the liquidation progresses.

Read more below to see how you may stay involved with the company throughout the liquidation process and how your role might change if you opt out.

read more