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A Creditors Voluntary Liquidation is a procedure were directors choose to voluntarily end their company’s business by appointing a Liquidator (the Liquidator must be a licensed Insolvency Practitioner) to liquidate its assets and wind up the affairs of the company.

The Creditors Voluntary Liquidation is the most common type of insolvency procedure for insolvent companies in Australia. In the year 2017, there were 5,915 Creditors Voluntary Liquidation appointments across Australia and over 2,200 so far in 2018.

What Is Liquidation is here to help Australian directors with advice you might need for any formal insolvency procedure (i.e. Creditors Voluntary Liquidation, Receivership, Voluntary Administration, etc.), from the very first day of financial problems, treatment of company assets and reimbursing the right creditors if the company can’t be saved.

If your company is struggling financially, there are many options available to you and it may be difficult to choose the best one. But getting the right advice and implementing the correct recognised procedure is critical, especially if you want to be a director again in the future and wind up your company in the right legal way without neglecting your director obligations to company creditors and any employees.

The Personal Property Securities Register (PPSR) commenced on 30 January 2012 and despite the PPSR being around since then many business owners do not know of it’s existence or it’s purpose. This blog article will provide you a basic overview of the PPSR and what you need to know.

The introduction of the PPSR was a big change to Australian law and how lenders and businesses secured their position. The PPSR is used by secured creditors, buyers and other interested parties to register their security interest position over a businesses or natural person’s personal property, search the register to determine if a security interest is registered and to also determine the priority of secured creditors in the case of a formal insolvency procedure (i.e. Creditors Voluntary Liquidation, Receivership, Voluntary Administration, etc.).

A common reoccurrence we see at What is Liquidation is that directors who have provided a personal guarantee relating to a commercial lease for a business premises have overlooked the real consequences should their business default on its lease obligations and/or fail. Directors often feel certain that their company will always flourish and don’t adequately account for the rental payments relating to the business premises.

All it takes is a lost of a major client or an unexpected downturn in the market to suddenly change your businesses financial position. Hence the reason why landlords want personal guarantees.

This blog article is intended to help directors understand how to comply with their duty to prevent insolvent trading.

When a company faces financial uncertainty (insolvency), it is common for directors to get caught between conflicting priorities. On one side, they are trying to continue business operations and return the company back to financial health, while on the other side, exercising a duty of care to company stakeholders (i.e. creditors, employees, etc.) who will lose money if the company ultimately fails (is placed into Liquidation).

In such situations, directors should not trade their company while insolvent, nor incur debt that would lead the company to insolvency as Section 588G of the Corporations Act 2001 (the Act) creates an obligation for directors to avoid insolvent trading. In addition to this, directors are to continue to comply with their usual legal obligations including directors’ duties and continuous disclosure obligations.

Throughout the years, What is Liquidation has heard countless stories from directors who operate as their own boss about their debt problems.

Have you ever heard the phrase “It costs money to make money?” Well, realistically that’s the case in the world of business. The main purpose of any business is to make money. Businesses that make money can better deliver their product/service to customers and advance their position in the market, whereas businesses that lose money are potentially on a one-way ticket to Liquidation.

Over the years What is Liquidation has seen that this area of insolvency is commonly misunderstood and in turn causes many problems for those involved in this transaction.

When a company is placed into Liquidation in Australia, a Liquidator’s primary duty is to realise the company’s assets and settle its outstanding liabilities. This will require the Liquidator to review past conduct, decisions and actions undertaken by the company and the management of its affairs.

Ultimately this will result in the Liquidator undertaking an in-depth investigation of the company.

In most cases directors have done nothing wrong in the lead-up to a Creditors Voluntary Liquidation (CVL) and are rarely intentionally insolvent. As such they are unaware of any common risk areas.

Once the CVL starts, Liquidators review and make sure any unintentional actions undertaken by directors in the best interests of the company are appropriately dealt with. But your’re probably thinking it’s a bit too late now.

Over the years, What is Liquidation has helped hundreds of solvent companies to liquidate and distribute their assets through the Members Voluntary Liquidation (MVL) process.  

We understand that directors and/or shareholders of solvent companies don’t want to pay high professional fees to a Liquidator to liquidate and ultimately have access to their funds that they are entitled to. That’s why our services are offered at a low cost fixed price.

This is a common scenario that comes past our desk at What is Liquidation. Most directors of businesses will experience some type of failure to varies degrees and for a number of different reasons. The key is to acknowledge that your business is failing and seek professional advice. So, don’t refuse to acknowledge there is a problem and bury your head in the sand, because we often find that the sooner directors seek our advice, the more options are available to potentially save their business.