When a company reaches the point of insolvency, it can be very difficult for directors to navigate the field of uncertainty, particularly with the looming concern of insolvent trading. Therefore, a Creditors’ Voluntary Liquidation (CVL) provides a mechanism for winding up a company that directors believe is insolvent and unable to pay its debts when due. This process can either be initiated through the members resolving to appoint a registered liquidator or following a voluntary administration of the company.
In order for the Appointment Documents to be valid and the company to proceed with the liquidation, a special resolution is passed by members and a meeting of creditors is convened within 11 days after the general meeting. At this point, the creditors have the ability to change the appointed liquidator.
This choice of liquidator can be crucial as there are a lot of important roles that must be fulfilled. As an experienced liquidator, Jonathan Paul McLeod meticulously works to determine the value and realise the assets held by the company. After which the liquidator distributes funds in accordance with the Corporations Act 2001 (Cth):
- Primarily to pay creditors who hold secured assets;
- To employee entitlements;
- Finally, payments to unsecured creditors on the basis of debts owed.
Also in line with a Liquidator’s obligations, Jonathan McLeod, as a liquidator will conduct reviews of the financial history of the company to investigate a number of things including:
- Whether or not the company traded while insolvent;
- The historical financial performance of the company;
- Whether or not any preference payments had been made to creditors, or other transactions entered into the company that may require potential recovery actions by a liquidator;
- Any offences which may need to be reported to the Australian Securities and Investments Commission (ASIC).
During this period of liquidation, the directors still have the same duties, along with additional requirements to provide the liquidator with a Report as to Affairs for the company, provide all of the company’s records and to reasonably assist in the process when required.
At the end of the day, a CVL may be the best option for a company as it serves as a way to limit personal liability under a Director Penalty Notice from the ATO, insolvent trading and helps to avoid involuntary liquidation imposed by the ATO or other creditors.
For more information on Creditors’ Voluntary Liquidation and how Jonathan Paul McLeod and his expert team can help you, contact us today on (07) 3004 0800.