When directors and shareholders feel they are no longer capable of maintaining or operating their business which appears insolvent, then they may wish to initiate a liquidation of their company themselves.

The Creditors Voluntary Liquidation process allows for an orderly winding up of a company and bringing its affairs to an end. The Liquidator acts as an independent third party to ensure that the process is conducted appropriately and in accordance with the Corporations Act 2001 (Cth). It allows for a realisation of the company’s assets, investigations into the company’s failure and distribution of the company’s assets amongst creditors.

The liquidation commences immediately upon the shareholders of a company passing a resolution that the company be wound up and a liquidator be appointed. Once the liquidation has commenced, the Liquidator takes control of the company’s assets and affairs and is the only one with the power to bind the company. In general, the Liquidator will:

• identify, secure and realise the company’s assets;
• identify avenues for the recovery of funds for the benefit of creditors;
• investigate the failure of the company;
• identify any transactions that may be void;
• report to creditors and hold meetings;
• report to the Australian Securities and Investments Commission on any offences committed by company officers;
• distribute any company assets to creditors; and
• apply to ASIC to deregister the company.

Once the Liquidation has commenced:

• unsecured creditors can’t begin, continue or enforce their claims against the company without the consent of the court;
• owners of property used or occupied by the company, or people who lease such property to the company can recover their property;
• secured creditors can enforce their charge over company property; and
• a creditor holding a personal guarantee from the company’s director or other person is able to enforce the guarantee.