What is a SIMPLIFIED LIQUIDATION?
The Federal Government has announced sweeping changes are planned for the insolvency industry. A key change is a new Simplified Liquidation process designed for Small Business.
The Law and associated Regulations are currently being reviewed by Parliament and the Insolvency Industry. The information on this page is what we know so far and is subject to change.
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.
INSOLVENCY LEGISLATION IS CHANGING, UNDERSTAND WHAT IS NEW AND FIND THE BEST PATH FOR YOUR BUSINESS IN 2021 BY DOWNLOADING OUR WHITEPAPER.
- Navigate the upcoming legal changes to insolvency
- Understand the possibilities post-COVID for your business
- Read about Simplified Liquidation and Simplified Restructuring
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 are 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 is 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.
- All requirements for the liquidator to call creditor meetings and the ability to form committees of inspection have been removed.
- 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) have been simplified.
- The liquidator can now communicate with creditors using technology other than post in voting and other communications.
What will a Simplified Liquidation cost?
It will depend on the circumstances, but we expect the cost to be under $6,000.
When will the Simplified Liquidation become available?
The law is now in effect, but the necessary forms are still being finalised. If you are interested in Simplified Liquidation, you may wish to Register Your Interest in the box at the top of this page. We will keep you informed of the specifics as they unfold. We expect to be offering Simplified Liquidations in the second half of February 2021.