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Liquidation is the process of formerly winding up a company to the benefit of creditors. There are two types of liquidation: creditor’s voluntary liquidation – often referred to as business liquidation – and members’ voluntary liquidation.
A creditors’ voluntary liquidation occurs when the directors and shareholders of a company resolve that the company is insolvent and its affairs should be wound up. It’s a fast and effective strategy to deal with a company that can no longer pay its debts – including amounts owing to the ATO – and helps directors comply with their statutory duties.
The members’ voluntary liquidation (MVL) process is a procedure for solvent companies initiated by the company’s members. It involves the orderly winding-up of the company’s affairs and the appointment of a liquidator to manage the process of realising the company’s assets, ceasing or sale of its operations, payment of its debts (if any) and distribution of surplus assets (if any) among its members.
What does the liquidation process involve?
Acting as your appointed liquidator, we’ll undertake the following activities:
- Secure and realise the company’s assets
- Distribute the proceeds of asset realisation to creditors (and for member’s voluntary liquidation, distribute surplus assets amongst members)
- Investigate and report the company’s affairs to creditors
- Apply for deregistration of the company on completion of the liquidation
There is no set timeframe for liquidation to complete. Typically, a simple liquidation would take 3-6 months. More complex liquidations may take longer that 6 months to complete.
What are the benefits of liquidation?
- Allows a clean break from the past
- Outstanding debts are written off
- Minimises exposure to insolvent trading claims
- Any legal action against the company is halted