What is a Simplified Liquidation?
A simplified liquidation is a cut down version of the current Creditors Voluntary Liquidation (CVL) process. It is designed to be simpler and therefore cheaper than a standard CVL.
Who can use a Simplified Liquidation?
The process is accessible to incorporated businesses with liabilities of less than $1 million, who have not used the process in the last 7 years and have all tax lodgements up to date.
How do you commence a Simplified Liquidation?
A Simplified Liquidation is started in the same way as a CVL – with a resolution of shareholders. The appointed Liquidator then decides if they want to adopt the Simplified Liquidation Process in the first 20 business days of the Liquidation process.
How does the Simplified Liquidation differ from a standard Creditors Voluntary Liquidation?
- There will be reduced circumstances in which a liquidator can seek to clawback an unfair preference payment from a creditor that is not related to the company.
- The liquidator will only be required to report to ASIC on potential misconduct where there are reasonable grounds to believe
that misconduct has occurred, and that misconduct has had a substantial effect on creditors.
- It will remove all requirements for the liquidator to call creditor meetings and the ability to form committees of inspection.
- It will simplify the dividend process (where creditors receive a return
proportionate to their debt) and the proof of debt process (where
creditors provide information as to the debt they are owed, which is
assessed and accepted or rejected by the liquidator).
- It will allow the liquidator to communicate with creditors using technology other than post in voting and other communications.
What will a Simplified Liquidation cost?
It is too soon to speculate on actual costs, but given the Simplified Liquidation is designed to be cheaper than a Creditors Voluntary Liquidation, we expect the cost to be well under $7,000.
When will the Simplified Liquidation become available?
The government is aiming to pass the legislation in time to make the Small Business Restructuring Process available by 1 January 2021.