Creditors' Voluntary Liquidation, Handled Properly
If your company cannot pay its debts, a creditors' voluntary liquidation is the orderly way to wind it up. You start it rather than a creditor forcing it, and a registered liquidator runs it.
What is creditors' voluntary liquidation?
A creditors' voluntary liquidation is the winding up of an insolvent company that the company itself starts. The directors resolve that the company is insolvent, the members pass a special resolution to wind it up, and a registered liquidator is appointed to take control. No court order is needed, which is the key difference from court liquidation.
A CVL can also follow a voluntary administration, where creditors resolve at the end of the administration that the company should be wound up.
Deciding to close a company is hard. Acting early keeps you in control of the timing and helps show you took your duties seriously. We will not promise to make your debts disappear. This is not debt relief.
- Who starts it
- Directors resolve that the company is insolvent, then members pass a special resolution of at least 75% of votes cast.
- What happens to your powers
- They cease on appointment. You hand over the books and records, generally within five business days.
- How long it takes
- It depends on the assets and what the investigation turns up. We give you a realistic timeframe on the first call.
- What it costs
- The first call is free. The liquidation itself is priced on size and complexity.
What you protect when you appoint a liquidator
The alternative is waiting for unsecured creditors to force the issue, which costs you every one of these.
You control the timing
A CVL is initiated by company directors, so you decide when.
Your insolvent-trading position
Appointing a liquidator rather than trading on is the best way to stop the debts increasing while the company is insolvent.
Creditor action channels
Once the winding-up resolution passes, proceedings cannot be started or continued against the company except with the court's leave.
Your employees
Employees are a priority class of creditor, and the liquidator helps eligible staff access the Fair Entitlements Guarantee.
When liquidation is the right option for an insolvent company
Usually when there is no realistic path back to trading solvently.
You cannot pay debts as they fall due
The core insolvency test.
If the company cannot pay its debts as and when they fall due, it is insolvent, and trading on exposes you personally to insolvent trading.
A statutory demand, and the court liquidation that follows
A creditor has moved.
An unpaid statutory demand allows a creditor to apply to the court to wind up the company. Court liquidation is creditor-initiated, and the court appoints the liquidator. Acting first keeps the timing with you.
The ATO is chasing, or another process has ended
Tax debt, a DPN, or the end of the road.
Unpaid tax and a director penalty notice are the most common reasons directors call us. So is the end of something else: a failed turnaround, or a voluntary administration or DOCA that has ended.
How the creditors' voluntary liquidation process works
The creditors' voluntary liquidation process has a set order under the Corporations Act 2001.
- STEP 1
Appoint a liquidator and hand over control
Directors resolve that the company is insolvent. Members then pass a special resolution by at least 75% of the votes cast, and the registered liquidator is appointed on the day it passes. Directors' powers cease, and the books, records, and a report are generally handed over within five business days.
- STEP 2
Creditors are notified, and a creditors meeting may follow
The liquidator notifies creditors, generally within about 10 business days, and reports on what they can expect.
- STEP 3
The company's assets are realised and investigated
The liquidator collects and sells the company's assets, then investigates why it failed. That covers whether the company traded while insolvent, and voidable transactions that can be recovered: unfair preferences, uncommercial transactions and creditor-defeating dispositions. Suspected offences are reported to ASIC.
- STEP 4
A fair distribution, then deregistration
Once assets are realised and investigations complete, the liquidator distributes the proceeds in the statutory order, and the company is deregistered.
When liquidation is not the right option
Liquidation is the wrong tool in these situations.
The business is still viable
Breathing room, not a wind-up.
You need time to restructure
A voluntary administration can buy that time.
Liabilities are under $1 million
Small business restructuring may let you keep trading while a plan deals with the debt.
The company is solvent
A members’ voluntary liquidation is the correct way to close it.
In those situations, we point you to what genuinely helps.
1300 727 739Real people, on your side, when it matters most
At Rapsey Griffiths, you'll deal with the people whose name is on the door - Mitch Griffiths and Chad Rapsey, Founders. Mitch and Chad have spent decades on corporate insolvency matters and turnaround work across NSW and nationally. You'll get a direct view of where the company stands and what we'd do about it. If a business can be saved, we'll say so, and if it can't, we'll say that too.
What people ask us first
Straight answers to the questions we hear most.
What happens to employees in a liquidation?+
Does a CVL affect my credit score, and can I be a director again?+
What’s the difference between a CVL and court liquidation?+
Is there a simpler process for a small company?+
Can the ATO still come after me personally after the company is liquidated?+
Explore how else we can help
Voluntary administration
An administrator takes control and puts the best available outcome to creditors.
What administration involves →Small business restructuring
Keep control and keep trading while a plan deals with the debt. Liabilities under $1m.
How the SBR process works →Turnaround & restructuring
Turnaround is the work of fixing a viable company while you keep control, before anyone is appointed.
What turnaround involves →