What You Need to Know Before Opting for Voluntary Liquidation
Voluntary liquidation, usually referred to as a Members’ Voluntary Liquidation (MVL), can be a significant decision for any company facing financial difficulty. At the Liquidation Advisory Centre, we can help you understand the process, the implications, and other relevant considerations before you proceed.
Often, other options are available when a business faces financial difficulties, so we offer a free consultation to discuss strategy and ensure you are aware of all the possibilities before opting for voluntary liquidation.
Our team has over 30 years of experience dealing with insolvency and liquidation and knows that these decisions require careful consideration and planning. Here’s what you need to know before choosing voluntary liquidation:
Understanding Voluntary Liquidation
Voluntary liquidation is initiated by the company’s shareholders when they decide to voluntarily wind up the company’s affairs. It involves appointing a liquidator to realise the company’s assets, settle its liabilities, and distribute any surplus among shareholders.
Types of Voluntary Liquidation
There are two main types of voluntary liquidation in Australia:
- Members’ Voluntary Liquidation (MVL): Chosen when the company is solvent and can pay its debts in full within 12 months. The company’s shareholders initiate MVL and require a declaration of solvency from the directors.
- Creditors’ Voluntary Liquidation (CVL): Selected when the company is insolvent and unable to pay its debts as they fall due. The company’s directors initiate CVL, and creditors play a significant role in liquidation.
Reasons for Voluntary Liquidation
Companies may opt for voluntary liquidation for various reasons, including:
- Financial difficulties and insolvency.
- Completion of the company’s objectives or expiration of its lifespan.
- Strategic restructuring or exit from the market.
- Shareholders’ decision to dissolve the company and distribute assets.
Duties and Responsibilities of Directors
Company Directors have specific duties and responsibilities throughout the voluntary liquidation process, including:
- Make a declaration of solvency for MVL or convene a meeting of creditors for CVL.
- Cooperating with the appointed liquidator and providing access to company records and information.
- Acting in the best interests of creditors and shareholders throughout the liquidation process.
Appointment of Liquidator
In both MVL and CVL, a liquidator is appointed to oversee the liquidation process. The liquidator’s role includes:
- Realising the company’s assets, including selling assets and recovering debts.
- Settling the company’s liabilities, including paying creditors in accordance with the priority regime.
- Distributing any surplus among shareholders.
Implications for Creditors and Employees
Creditors and employees of the company have specific rights and entitlements during voluntary liquidation, including:
- Creditors may lodge claims with the liquidator to recover outstanding debts owed by the company.
- Employees may have outstanding entitlements, such as unpaid wages, superannuation contributions, and redundancy payments, which are prioritised in the distribution of assets.
Legal and Regulatory Compliance
Voluntary liquidation is subject to legal and regulatory requirements set out in the Corporations Act 2001 (Cth) and overseen by the Australian Securities and Investments Commission (ASIC). Compliance with these requirements is essential to ensure the validity and legality of the liquidation process.
Opting for Voluntary Liquidation
Before opting for voluntary liquidation in Australia, it’s essential to understand the process, implications, and considerations involved.
At the Liquidation Advisory Centre, we offer professional advice from qualified ASIC registered advisors who can provide valuable guidance and assistance in navigating the complexities of voluntary liquidation and ensuring compliance with legal requirements.
By understanding your obligations and responsibilities, we ensure that you can proceed confidently and clearly in winding up the company’s affairs in the most efficient and effective manner possible.
Andrew Bell Liquidation Advisor
Let’s Talk
With over 30 years of experience in debt solutions and company liquidation in Australia, Andrew can find a solution for you.
“Nothing is more satisfying to me than knowing that I’ve helped someone get back on their feet by guiding them through the liquidation process. Rest assured, you’re in good hands with me as we solve your financial problems together.”