Liquidation, also referred to as winding up, is a process whereby a Liquidator is appointed to collect and realise the assets of a company and then distribute those funds in accordance with the Corporations Act and bring the company’s existence to an end.  There are three different types of liquidations – Court Liquidation, Creditors’ Voluntary Liquidation and Members’ Voluntary Liquidation.

Here we consider Creditors’ Voluntary Liquidation.

How does the Creditors’ Voluntary Liquidation commence?

Where the directors and shareholders of the company recognise that the company is insolvent and cannot continue its operations or be rehabilitated, the directors may resolve to seek a resolution of shareholders and to place the company into liquidation.

It is more usual however for Creditors’ Voluntary Liquidations to follow a Voluntary Administration if a Deed of Company Arrangement is not proposed or approved at the second meeting of creditors in a Voluntary Administration.

Who is the Liquidator?

The Liquidator must be a Registered Liquidator (i.e. a liquidator registered with ASIC).  He or she must not be a significant debtor or creditor of the company and must be independent of the company and its officers.

Liquidator’s powers

The Liquidator’s main task is to take possession of the company’s assets and realise them so that the funds can be distributed to creditors.