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What is Liquidation? – Understanding Your Options

Here at Insolvency Services Australia, we understand that without a thorough knowledge of industry jargon, it can be hard to understand which insolvency regime is right for you. That is why we have broken down for you the various types of company liquidation using easy to understand language.

What is Liquidation?

A company liquidation is the process to officially close a company after it has ceased to trade. A Registered Liquidator must be appointed to supervise the liquidation process from start to finish if the company is insolvent.

Therefore, company liquidations are split into solvent liquidations and insolvent liquidations.

The appointment of a Liquidator can be made on either a voluntary or involuntary basis; the main advantage to voluntarily liquidating your company is a greater sense of control over the process, including being able to appoint a Liquidator of your own choosing.

Insolvent Company Liquidations

Creditors Voluntary Liquidation (Insolvent Liquidation)

If your company is insolvent, meaning it is unable to pay its debts when they fall due, then a Creditors Voluntary Liquidation (CVL) will be required. Whilst the name may suggest otherwise, a CVL is still initiated by the directors and shareholders of a company. Once the decision to liquidate has been reached a Liquidator is appointed by the directors and shareholders of the company.

Court Liquidation

A Court Liquidation takes place when a company is taken to court (usually by a creditor) and the court appoints a liquidator.  This process is lengthy and can be relatively expensive for the creditor. The company to be wound up will have no control over the process as the creditor who approaches the court will choose the liquidator.

Solvent Company Liquidations

Members Voluntary Liquidation

A Members Voluntary Liquidation (MVL) is a formal way to wind up a company that is solvent, meaning that it has assets and enough cash to pay our all unpaid debts (including the Australian Taxation Office).

If you would like more information, speak to a professional insolvency experts today! Please contact Insolvency Services Australia on 1800 003 883. Our toll-free hotline is open 24 hours, every day 7 days a week.

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