Liquidation is a strategic and transparent process initiated by company directors to efficiently wind up the affairs of a financially distressed company. It ensures the fair distribution of assets among creditors while complying with Australian legal obligations.
A strategic and transparent process initiated by company directors to efficiently wind up the affairs of a financially distressed company, ensuring a fair distribution of assets among creditors.
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Creditors’ voluntary liquidation is an effective solution for businesses without a viable model. By appointing a liquidator, directors can minimise personal liability for insolvent trading and creditor-defeating dispositions. Liquidation ensures fair treatment of creditors, reduces stress for directors, and allows employees to claim unpaid entitlements through Australia’s Fair Entitlements Guarantee (FEG) scheme. Additionally, the liquidator’s role helps mitigate risks associated with ATO debts and Director Penalty Notices.
Our restructure process is your pathway to a more resilient and prosperous future. Comprising of six strategic steps, we will collaborate closely with you to navigate the complexities of reorganisation.
Consultation
In the initial phase, we engage in a comprehensive consultation to understand your business intricacies and challenges.
Detailed Fact Finding
We conduct a thorough examination of your financials, gathering detailed facts to create our strategic approach.
3rd Party Engagements
Collaborating with external experts, including lawyers and valuators, ensures a well-informed strategy.
Restructuring Completion
The restructuring phase involves implementing tailored strategies to address financial issues and enhance the overall health of your business.
Consultation
In the initial phase, we engage in a comprehensive consultation to understand your business intricacies and challenges.
Detailed fact finding
We conduct a thorough examination of your financials, gathering detailed facts to create our strategic approach.
3rd party engagements
Collaborating with external experts, including lawyers and valuators, ensures a well-informed strategy.
Restructuring completion
The restructuring phase involves implementing tailored strategies to address financial issues and enhance the overall health of your business.
Liquidation appointment
When necessary, we guide you through the appointment of a liquidator, ensuring a smooth transition and adherence to legal procedures.
Post-CVL support
Our services extend to providing continuous support, helping you navigate challenges and opportunities for business recovery.
Liquidation Appointment
When necessary, we guide you through the appointment of a liquidator, ensuring a smooth transition and adherence to legal procedures.
Ongoing Support
Our services extend to providing continuous support, helping you navigate challenges and opportunities for business recovery.
Addressing the correct issues at the appropriate moment can determine whether a business thrives or fails. Our team is skilled in recognising the best course of action for each specific situation, assisting businesses across various industries and models in navigating challenging times and establishing feasible paths for future success.
Sometimes the only remaining option is to break a company down and re-distribute its assets. Not as intimidating as it sounds, it can be a relatively pain-free method of repaying creditors. When a business is in severe financial difficulty and it seems as though there is no chance of maintaining solvency (where the company’s assets exceed its liabilities), sometimes the only remaining option is to break the company down and re-distribute its assets. This process is known as liquidation.
Under a liquidation, the company ceases trade and operations, is deregistered and its assets are sold off to repay its creditors. Often, a liquidation is entered into involuntarily – the business owner holds off until the creditor takes them to court and the magistrate orders the liquidation – but a liquidation can be voluntary. Directors might apply to save themselves the time and expense that goes with a court case.
HOW DOES LIQUIDATION WORK? There are actually three different types of liquidation and the process is different for each type.
1. Members’ voluntary liquidation – This is for companies who wish to cease trading and do not want to sell the company. It is also known as ‘winding up’ a business and is not suitable for companies that are facing insolvency as the company must be able to pay its debts in entirety within 12 months of winding up the company. Once the majority of a company’s members have signed a solvency declaration, members are given a 21-day notice period. Following this notice period, a majority vote is taken to continue and the liquidation process can begin. This type of liquidation is suited to companies facing an uncertain future and wish to avoid financial trouble.
2. Creditors’ voluntary liquidation – This type of liquidation is used when members of a company decide that a company is, or will become, insolvent. It involves a similar process to members’ voluntary liquidation, where a special resolution of the members of the company is made and the 21 days’ notice period begins. Members will then vote and a majority agreement will see the appointment of a registered liquidator. This method of liquidation is for companies who are facing insolvency and wish to disband the company and its assets.
3. Court-appointed liquidation – This form of liquidation is for companies and assets that are deemed at risk from third parties or directors of a company it can be initiated by a creditor who is seeking payment. Although it sounds scary, it is actually a safe way to secure the company from further loss and financial damage whilst the situation is assessed. If the court decides that the company should be liquidated, the court will appoint a liquidator.
Sometimes, the only viable option for a struggling business is to undergo liquidation and redistribute its assets. While it may sound daunting, liquidation can be a relatively straightforward way to repay creditors and close a business in an orderly manner. When a company is in severe financial distress and maintaining solvency (where assets exceed liabilities) is no longer feasible, liquidation may provide a solution.
Under liquidation, the company ceases operations, is deregistered, and its assets are sold to repay creditors. While some liquidations are court-ordered—often initiated by creditors—a business can also voluntarily enter liquidation. By opting for creditors’ voluntary liquidation, directors can avoid the time, expense, and stress of a court-ordered process.
There are three primary types of liquidation in Australia, each with a distinct process:
The process begins when a majority of the company’s members sign a solvency declaration. A 21-day notice period is then issued, followed by a vote among members. If the majority agree, the liquidation process begins. Members’ voluntary liquidation is ideal for companies looking to exit trading before financial trouble arises.
2. Creditors’ Voluntary Liquidation This type of liquidation is designed for companies facing insolvency or at risk of becoming insolvent. The process is similar to members’ voluntary liquidation, starting with a special resolution by company members and a 21-day notice period. Once the resolution is passed, a registered liquidator is appointed to oversee the process.
Creditors’ voluntary liquidation is often chosen by directors who wish to address financial issues proactively, ensuring an orderly distribution of assets while minimising legal and personal risks.
3. Court-Appointed Liquidation In this form of liquidation, a creditor—or in some cases, another stakeholder—applies to the court to have the company liquidated. This is often pursued when creditors seek payment for outstanding debts. Although court-ordered liquidation might sound intimidating, it serves as a safeguard to protect assets and prevent further financial damage.
If the court deems liquidation necessary, a liquidator is appointed to manage the process, including asset distribution and creditor repayment.
Liquidation provides a structured approach to resolve financial issues, offering directors and stakeholders a way to close a business responsibly. Whether it’s through members’ voluntary liquidation, creditors’ voluntary liquidation, or court-appointed liquidation, the process ensures that assets are distributed equitably and legal obligations are met. For Australian businesses, understanding the options and seeking professional advice is crucial to navigating the complexities of liquidation effectively.
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