Simplified Liquidation

Simplified Liquidation

Recently introduced in 2021 in response to the Covid 19 pandemic, a simplified liquidation is a streamlined creditors’ voluntary winding up for companies that have liabilities of less than $1 million. It attempts to reduce the costs and time associated with winding up the affairs of small businesses.

A simplified liquidation process can be adopted where a company is in creditors’ voluntary liquidation and where the company meets the eligibility criteria.

To be eligible for a simplified liquidation, the company must:

• Be in a creditors’ voluntary winding up where the event that triggers the winding up occurred on or after 1 January 2021.
• Not have liabilities that exceed $1 million.
• Not be able to pay its debts in full within 12 months.
• Not have used a restructuring or simplified liquidation process in the last seven years. This also applies to the directors and former directors of the company.
• Be up to date with taxation lodgements.

The process is streamlined and seeks to cut the costs incurred in a traditional creditors’ voluntary liquidation, such as:

• Meetings of creditors are not held in a simplified liquidation process, with creditors voting via proposal forms instead.
• The scope of the liquidator’s investigations is limited.
• There is only one mandatory report to creditors required to be provided to creditors within three months of the liquidator’s appointment.
• If funds are available to pay a dividend to creditors, the liquidator is only able to make one dividend payment. This is likely to be near the end of the liquidation, and there is no ability to make an interim dividend distribution.

If you would like one of our team to assist you with determining whether you are eligible for the simplified liquidation process, please contact us.