The Federal Government has introduced a simplified liquidation process. This is aimed to reduce the costs of some liquidations and maximise returns to creditors.
In this article, we answer some of the frequently asked questions relating to the simplified process, including the cost of carrying out the liquidation.
What businesses will be eligible for the simplified liquidation process?
A business must have liabilities of less than $1 million to be eligible for the simplified liquidation process.
A business must also not have any materially overdue taxation lodgements.
What does a company need to do to start the process?
To start the simplified liquidation process, the shareholders of the company will have to pass a special resolution to place the company in liquidation. The directors of the company will also have to sign an acknowledgement that the business is eligible for simplified liquidation.
What are the differences between the current liquidation process and the new process?
The changes introduced in the new simplified process are intended to reduce the cost of liquidation. The following are some of the changes:
- The circumstances in which a liquidator can pursue recovery actions, including unfair preference payments from unrelated creditors will be reduced;
- The calling of creditor meetings and forming of committees of inspection will no longer be required;
- Additional use of technology will be allowed to facilitate the process;
- Reporting requirements will be reduced;
- ASIC lodgements, including lodgement of reports with ASIC on the conduct of those associated with a company will be reduced; and
- Proof of debt and dividend processes will be simplified.
How will creditors be ranked?
The ranking of creditors remains unchanged. They will still be the same as in the current liquidation process.
How much will it cost?
The cost to carry out the simplified liquidation by us will be no more than $5,500, if the company has no assets. There will be no upfront payment required from the directors if the company has sufficient assets to cover the some or all of the Liquidator’s cost.
Thinking of liquidation? We can help
Our advice to our clients has always been to liquidate a business only as a last resort. If you still have a viable business, there are other ways to free up the cash flow of your company in the short term.
We often assist clients with negotiating payment arrangements or settlements with their creditors. These can range from negotiating payment arrangements with the ATO, to negotiating a settlement of a commercial lease debt. A business may even take advantage of the newly proposed small business restructuring process to avoid liquidation and allow the business to ease up much needed cash flow.
So, if you wish to explore all the options that may be available to your business, get in touch with us on 1300 906 966 or send us an email at firstname.lastname@example.org to arrange a free confidential initial discussion.