Where a business is unable to be rescued and saved, we deliver an efficient, unbiased and transparent process demonstrated to realise the best value of all available assets in order to achieve the greatest return possible for creditors.
Creditors Voluntary Liquidations
Creditors Voluntary Liquidations take place when directors and shareholders of a company decide to initiate a liquidation. This typically takes place when they feel they are no longer able to sustain their business and they are looking for a means of winding things up.
Liquidators act as an independent third party to ensure that the process is conducted appropriately and in accordance with the Corporations Act.
At Brooke Bird, our policy is to examine each case on its merits and only recommend liquidation if appropriate. It is possible to place a company into Creditors’ Voluntary Liquidation almost immediately.
In January 2020 a new streamlined liquidation was introduced called a simplified liquidation. Under the Simplified Liquidation regime it:
- has removed the convening of meetings of creditors;
- enables the Liquidator to only declare and distribute a dividend once;
- excludes creditors from receiving any money if they fail to prove their debts prior to the payment of the dividend; and
- restricts the circumstances where a liquidator can pursue an unfair preference claim
While a Simplified Liquidation starts the same way as a Creditors Voluntary Liquidation it then converts to a Simplified Liquidation if certain criteria are met, including;
- The directors confirming that the company has not engaged in any improper transactions (known as voidable transactions)
- Liabilities of the company must be less than $1 million (including amounts due to terminated employees but excluding contingent debts)
- The company will not be able to pay all its debts in full within 12 months after the start of the liquidation.
- All taxation lodgement obligations are up to date
- Not have been through the process or used a simplified liquidation in the last 7 years – the same rule applies to directors of the company in the last 12 months
Further reading on Simplified Liquidations can be found here.
Members’ Voluntary Liquidations
When businesses cease trading, it’s important for creditors to be paid and surplus assets distributed to members.
Through the Members’ Voluntary Liquidations process, we work with a company’s external accountant to ensure its affairs are administered in the most effective manner and benefits to members are maximised through a liquidator’s distribution.
A Members’ Voluntary Liquidation can only occur if the business is solvent (i.e. it can pay all of its creditors). If it is found that the company is insolvent, it will be transitioned into a Creditors Voluntary Liquidation.
An Official Liquidation occurs if a creditor of a company makes a court application to have the company wound up because it cannot pay its debts, or its assets are at risk.
This process allows the company’s assets to be secured and realised in an orderly manner. It also allows for the company’s affairs to be investigated. Any proceeds from the sale of the company’s assets will be distributed to the creditors.
Brooke Bird can take on such appointments on behalf of creditors who are wishing to enforce their statutory rights.
When application to wind up a company is filed and the court finds that there is risk surrounding the company’s assets or business before the case is heard in court, it may appoint a provisional liquidator in the interim.
A Provisional Liquidator can be appointed in any of the following circumstances:
- A company’s assets could be lost or made unavailable before the winding-up application is heard in court.
- Company shareholders believe the directors are not discharging their duties properly, or are acting recklessly or in their own interests.
- When there is a need to protect the company’s assets or its business.
You might also be interested in: