What is Simplified Liquidation?
Simplified Liquidation is a streamlined version of the current more comprehensive Creditors Voluntary Liquidation (CVL) process. It is the winding-up of a company when it has creditors of less than $1 Million it cannot pay.
The concept of a Simplified Liquidation was announced by the Federal Government on 24 September 2020. Complete details on the process are not yet available, but we know the intention is to develop a simple and hence cheap liquidation process with Small Business in mind.
We think this is a fantastic development for Australian Small Business. At Dissolve we have worked for over 10 years to develop streamlined processes to bring the costs down for Small Business. We welcome the introduction of new legislation allowing us to take this even further.
Dissolve currently conducts hundreds of Small Business liquidations every year. Our highly systematised approach allows us to complete the process for small to medium businesses quickly and efficiently, and therefore at the lowest possible cost, making us the prefect choice for a Simplified Liquidation.
How Does Simplified Liquidation Differ From CVL?
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.
Less reporting to ASIC
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 email or web portals where they were previously restricted to post.
What Will it 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 under $7,000.
So far, we have the Government’s announcement and some information papers, but not the actual legislation. But the specific laws will come in the next few weeks. 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 have a bunch of Simplified Liquidations ready to roll on 1 January 2021.
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