Creditors Voluntary Liquidation
Creditor’s voluntary liquidation generally initiates when an insolvent company’s shareholders resolve to liquidate the company and appoint a liquidator.
In a court liquidation, a liquidator is appointed by the court to wind up a company on application by creditors, directors, shareholders, or ASIC.The liquidator in a court liquidation holds the same roles and responsibilities as that of a creditors’ voluntary liquidation.
Role of the Liquidator in a Creditors’ Voluntary Liquidation and Court Liquidation
- Protect, collect, and sell the company’s assets.
- Investigate and report to creditors the company’s affairs, including:
- Report to the Corporate Regulator, ASIC.
- Distribute money from collection and sale of assets as per the priorities in the Corporations Act 2001.
What happens to the Company?
The Liquidator takes control of the Company and the directors powers cease. The Liquidator will proceed to realise assets, complete their investigations and based on the quantum of realisations make a distribution to creditors. The liquidator will then apply to the Australian Securities and Investments Commissioner to deregister the company.
What happens to creditors?
After a company goes into liquidation, unsecured creditors cannot commence or continue legal action against the company, unless the court permits. The Liquidators will report to creditors on their asset realisations, investigations, and the likelihood of a dividend.
What reports are sent to creditors?
Within 10 business days after their appointment as liquidator in a creditors’ voluntary liquidation (or 20 business days in a court liquidation), the liquidator must give creditors notice of their appointment and information advising creditors about their rights in a liquidation.
Within 3 months after their appointment, the liquidator must send a report to creditors containing information about the company’s estimated assets and liabilities and the likelihood of creditors receiving a dividend (part repayment of their debt).