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.
How do you commence a Simplified Liquidation?
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.
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 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.
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 Liquidaiton, 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.