As insolvency professionals, we are often asked by company directors or advisors why an insolvent company cannot simply be walked away from and left for ASIC to deregister. This is a practice that, although frowned upon by regulatory bodies, can and has been overlooked when it involves companies with small amounts of unsecured creditors. The problem for the directors that choose this option, however, is that the ATO in recent years has undertaken more frequent and severe actions to collect its debts, unsecured or otherwise. In this article we will discuss some of the dangers of letting ASIC deregister an insolvent company, as well as some of the benefits of winding up a company properly.

The Immediate Dangers of Deregistration

In addition to the personal liability issues of walking away from a company and letting ASIC deregister it (more on that later). There are some immediate downsides to not winding up affairs correctly these are:

  • Damage to your professional reputation: Potential clients, partners, and investors may view insolvent deregistration as a sign of negligence or irresponsibility. Maintaining a positive reputation is crucial for future business prospects, and properly winding up your company demonstrates your commitment to ethical business practices.
  • Difficulty establishing a new business: If you decide to start a new business after leaving your previous one unaddressed, you may encounter obstacles when dealing with financial institutions, suppliers, and regulators. They may be reluctant to work with you due to the unresolved matters from your previous company. By winding up your company diligently, you can start fresh and establish your new business without unnecessary hindrances.

Personal Liability and Deregistration

Personal liability arising from deregistration typically occurs when directors decide to pay out any secured creditors, priority creditors, and creditors that hold a personal guarantee over them. They then proceed to leave any smaller unsecured creditors outstanding (typically owed less than $10,000.00) and cease contact. In these situations the company will have drained any remaining assets and the only remaining large creditor will be the ATO. The tax office will typically be owed unpaid PAYG, GST etc. for outstanding or non-lodged returns.

After some time, the ASIC will issue its annual fee invoice, which will go unpaid, and they will proceed to deregister the company. Whilst the ACN of the company is cancelled by the ASIC, the ABN of the company registered with the ATO is not. This means that should the ATO issue a director penalty notice (DPN) for outstanding monies owed, this debt will eventually shift from a company liability to a personal liability of the director once the DPN period expires (see our article here for more information). Typically, once issued a DPN for non-lockdown amounts can be negated by placing the company into liquidation within 21 days. However, if the company has been deregistered by ASIC, then there is no company to be placed into liquidation and the liability will shift to the director.

“Well, what if I just re-registered the company?” you might be asking. Given that the company only has 21 days to be placed into liquidation there are two main options for re registering a deregistered company:

  • Apply to ASIC to have the company re registered; for this to occur the application must be completed by a director, secretary, or member and you:
    • Have to confirm that the company will be solvent (able to pay its debts as and when they fall due) upon reinstatement.
    • Cannot be disqualified from managing corporations.
    • Must provide documentation to support reasoning why the company should not have been deregistered.
  • Apply to court to for an urgent court reinstatement of the company, and incur the necessary fees and application costs to do so.

With both options, re-registration is either highly unlikely or costly, especially given that any company that has been walked away from and deregistered will not be able to pay its debts as and when they fall due. Moreover, any non-urgent court applications may take longer than the 21-day deadline given by the ATO for DPN expiry and liability transfer.

The Benefits of Winding Up a Company Properly

Given the dangers of deregistration, and in our professional opinion as insolvency experts. Winding up the affairs of the company through proper insolvency processes is always the right course of action. Benefits include:

Control Over the Process

Opting for voluntary winding up gives you control over the entire process. You can plan and execute the winding up in a manner that suits your specific needs and circumstances. By actively participating in the process, you can ensure that all loose ends are tied up, minimizing the risk of future complications.

Protection from Personal Liability

Properly winding up your company allows for a clear separation between your personal assets and any liabilities associated with the business. This safeguards your personal wealth from being impacted by any remaining debts or legal claims against the company.

Closure and Peace of Mind

By voluntarily winding up your company, you can achieve closure and obtain peace of mind. Knowing that you have fulfilled your legal obligations and tied up all loose ends provides a sense of finality and enables you to move forward confidently with your future endeavours.


In summary given the recent frequency of DPNs being issued for company tax liabilities, walking away from your company and leaving it to the ASIC to deregister is a poor decision and one likely to leave you with large personal liabilities. There are plenty of benefits to winding up a company voluntarily and properly, and insolvency practitioners like us have a wealth of experience in achieving the best outcomes when these options are necessary.

If you have any questions about deregistration, have recently received a DPN, or if your business (or your client’s business) is facing financial trouble. Please contact our offices on 1300 904 946, or email for an obligation free insolvency consultation.


This information and the contents of this publication, current as at the date of publication, is general in nature to offer assistance to RRI Advisory’s clients, prospective clients and stakeholders, and is for reference purposes only. It does not constitute legal or financial advice. If you are concerned about any topic covered, we recommend that you seek your own specific legal and financial advice before taking any action.