A solvency resolution is a resolution by the company directors that the company is able to pay its debts on time by the due date (of the debts). The solvency resolution should be made within two months after the annual review date. Best time to do a solvency resolution is when you receive the annual company statement from ASIC.
If the company (in the directors’ opinion) can pay its debts on time when due, you must pass a positive solvency resolution. You do not have to lodge it with ASIC. You must however keep the record, with your other company records.
If the company (in the directors’ opinion) is not able to pay its debts when they fall due, you must pass a negative solvency resolution and lodge with ASIC within 7 days. A form 485 is required.
A majority of the directors must have a reasonable basis for their opinion to pass the solvency resolution either positive or negative.
If your company is unable to pass a solvency resolution within 2 months of the annual review date then a form 485 needs to be lodged with ASIC.
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