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.

The process is accessible to incorporated businesses with liabilities of less than $1 million.

You must appoint a registered liquidator. Currently this is done with a resolution of shareholders of the company – there is no indication this will change.

• 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 (under section 533) on potential misconduct where there are reasonable grounds to believe
  that misconduct has occurred.
• 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.

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.

The government is aiming to pass the legislation in time to make the Small Business Restructuring Process available by 1 January 2021.