Creditors’ Voluntary Liquidation

A creditors’ voluntary liquidation is initiated at a meeting of the company’s directors, which convenes a meeting of shareholders.  Assuming that the consent to short notice provisions in the Corporations Act are satisfied, a meeting of shareholders can usually be held immediately after the meeting of directors.  If shareholders do not consent to short notice of the meeting, then 21 days notice must be provided.  At the shareholders’ meeting resolutions are passed to wind up the company and appoint a Liquidator.  Only a Registered Liquidator can be appointed.

 

The Liquidator will then convene a meeting of creditors, which must be held within 11 days after the day of the meeting of shareholders.  At that meeting, the creditors may resolve to remove the Liquidator and appoint another Registered Liquidator.  Creditors may also resolve to appoint a Committee of Inspection.

 

The main tasks of the Liquidator are as follows:

• identify, preserve, protect and realise the company’s assets;
• to investigate the affairs of the company and the conduct of its directors;
• if the company is still trading, to sell or wind down its business;
• to distribute the company’s assets in accordance with the Corporations Act; and,
• once the winding up has been completed, to arrange for the company’s deregistration.

A Liquidator may commence legal proceedings to recover claims for voidable transactions such as unfair preferences, uncommercial transactions, unfair loans or unreasonable director related transactions.  A Liquidator may also commence legal proceedings against the directors to recover claims for insolvent trading.

 

A creditors’ voluntary liquidation may follow a members’ voluntary liquidation, a voluntary administration or a Deed of Company Arrangement.

 

A creditors’ voluntary liquidation is appropriate when:

• the company has ceased trading, or will shortly cease to trade;
• the company is insolvent; and,
• there are outstanding employees’ entitlements and the company has insufficient realisable assets to meet those claims.  Once the company is wound up, the employees can claim those entitlements under the Fair Entitlements Guarantee scheme.