A creditors voluntary liquidation or CVL, as commonly referred, is the process whereby the assets of a corporation are realised in an orderly manner and the proceeds distributed among creditors of the company in satisfaction of their claims against the company. Any surplus funds are returned to members.
A creditors voluntary liquidation requires that the company is insolvent but despite its title, cannot be initiated by creditors. A creditors voluntary liquidation is initiated when the members of the company resolve, by special resolution, that the company be wound up following the directors determining that the company is insolvent and should be wound up.
The powers, duties and responsibilities of a liquidator in a creditors voluntary winding are contained in the Corporations Act 2001. The liquidator realises all of the company’s assets, investigates the affairs of the company, pursues available recoveries and, where necessary, reports to the Australian Securities and Investments Commission. Distributions are paid to creditors in the priority specified by the Corporations Act 2001 and surplus funds, if any, are returned to members.
The company is deregistered following the completion of the liquidation.
A creditors’ voluntary liquidation is a fast and effective way for directors to mitigate any further losses to themselves and creditors. The appointment of a creditors voluntary liquidator, may, depending on the circumstances also avoid personal liability under the director penalty regime of the Australian Taxation Office.
Determining insolvency can be complicated, use our self-evaluation questionnaire to determine whether you are experiencing signs of insolvency.
For more information on the creditors voluntary liquidation process, please contact us to arrange an immediate initial interview without obligation.