What is simplified liquidation?

Simplified liquidation is part of a recent ASIC law explicitly designed for struggling small businesses as a faster, low-cost way to wind up an insolvent company.

Simply put, it’s when you stop your business, sell all its assets and distribute the money to creditors according to a set order prescribed by law. It is a streamlined version of the Creditor’s Voluntary Liquidation (CVL), specifically for companies with less than $1 million in debt.

Meetings of creditors are not held in a simplified liquidation process, and creditors cannot form a committee of inspection. Instead, a liquidator must report to creditors within three months of their appointment when the liquidation is finalised and the likelihood of a dividend being paid.

What are the eligibility criteria for simplified liquidation?

To be eligible for simplified liquidation, your company must have $1 million or less in liabilities. It only applies if the event that triggered the start of the winding up occurred on or after the 1st of January 2021. In addition, to be eligible, the company:

• Is not able to pay its debts in full within 12 months
• Has not undergone restructuring or been the subject of a simplified liquidation process in the past seven years
• Ensures that all of its tax lodgements are up to date

To determine if your business meets the criteria for simplified liquidation, we encourage you to contact our highly qualified team of registered liquidators.

What are the benefits?

The benefits of simplified liquidation are that it allows you to protect your assets from being taken by your creditors. You can also expect faster turnaround times, lower costs associated with the process and greater certainty about when the process will end.

These factors make it an attractive option for many struggling businesses looking to get back on track quickly and easily.