Simple Creditors Voluntary Liquidation
A new streamlined liquidation pathway was enacted by the Federal Government on 1 January 2021 which is intended to reduce time and cost in the creditors voluntary liquidation (CVL) process and aims to ensure better returns for creditors.
A liquidator is appointed in the usual fashion, but chooses to enact the Simplified CVL (SCVL) process, advises creditors within 10 business days and seeks approval to adopt the simplified liquidation process.
To be eligible for a SCVL, a company must:
- have total liabilities of less than $1 million as at the date of the triggering event (being the date of the liquidator’s appointment in most cases);
- have all tax lodgements up to date meaning all relevant tax returns and activity statements are lodged with the ATO;
- be unable to pay its debts within 12 months;
- have not undergone restructuring or simplified liquidation in the last 7 years*;
- have no current or former (within 12 months) directors which have been a director of a company which has undergone restructuring or simplified liquidation in the last 7 years*;
- have complied or taken to have complied with providing a Report on Company Activities and Property (Form 507) and Declaration of Eligibility.
* Unless it began less than 20 business days before the current SCVL commenced.
The key modifications in a SCVL to the standard CVL are:
- reducing the circumstances in which a liquidator can seek to recover an unfair preference payment from a creditor that is not related to the company;
- only requiring the liquidator to report to ASIC on potential misconduct where there is reasonable grounds that misconduct has occurred;
- removing requirements to call creditor meetings and the ability to form committees of inspection;
- simplifying dividend and proof of debt processes;
- maximising technology neutrality in voting and other communications.
The rights of secured creditors and the statutory rules as to the payment of priority creditors such as employees are not affected.
Contact your local Rodgers Reidy office for further information.