Creditors Voluntary Liquidation

Our approach to Creditors Voluntary Liquidation

If a business is unable to meet its liabilities, the company’s members must decide what action to take to maximise the return to creditors, and avoid the possibility of insolvent trading.

SV Partners understands this is a difficult situation for any business, and has many years’ experience in all types of corporate insolvency matters across Australia.

What is Creditors Voluntary Liquidation?

A creditors voluntary liquidation (CVL) occurs when the company’s members determine that the company can no longer satisfy its debts and is insolvent, or likely to become insolvent.

It allows for an orderly realisation of the company’s assets, investigations into the company’s failure and distribution the company’s assets amongst creditors.

Why choose a Creditors Voluntary Liquidation?

The CVL process allows for a systematic approach to winding up a company and bringing its affairs to an end. The Liquidator acts as an independent third party to ensure that the process is conducted appropriately and accordingly to the relevant law.

How is a Creditors Voluntary Liquidation commenced?

A CVL is commenced after the company’s members pass a resolution that the company be wound up and a liquidator be appointed.

A CVL may also begin as a result of creditors of a company in Voluntary Administration resolving that the company be wound up.

A company that has a winding up application commenced against it cannot resolve to be wound up whilst the application remains on foot.

What is the impact of a Creditors Voluntary Liquidation on key stakeholders?

 A CVL may impact various key stakeholders:

Secured creditors

A CVL does not usually affect a secured creditor’s right to enforce its security. Often, a secured creditor will allow a liquidator to sell charged assets during the course of the liquidation provided the rights of the secured creditor are maintained.


Employee entitlements (including wages, superannuation, leave and termination pays, etc.) are afforded as a priority under the Corporations Act ahead of ordinary unsecured creditor claims in the event of a distribution in a liquidation.

The federal government has a scheme to protect employee entitlements in the event of a company being placed into liquidation – the Fair Entitlements Guarantee Scheme (FEGS) or previously known as the General Employee Entitlements and Redundancy Scheme (GEERS). This scheme provides a fund to satisfy outstanding wages, leave entitlements and termination pays, but it does not cover unpaid superannuation. Please refer to the FEGS website at for further information. (Relevant news articles)

Unsecured Creditors

The appointment of a liquidator suspends an unsecured creditor’s rights to pursue a company further for unpaid debts. An unsecured creditor is able to lodge a claim in the liquidation for the amount of its debt and will rank equally with all other unsecured creditors for any distribution.

An unsecured creditor that holds a personal guarantee in respect of company debts can proceed to enforce its rights against the guarantor under the guarantee once the liquidation commences.


Shareholdings generally have no value once a CVL is commenced as the company is insolvent and has insufficient assets to satisfy its liabilities. Accordingly, shareholders will most likely not receive a distribution in a CVL.


The powers of a director are suspended on the appointment of a liquidator and only the liquidator is able to bind the company in any transaction. A director is required to assist the liquidator in undertaking the winding up and has an obligation to comply with any requests made by the liquidators.

Directors often provide personal guarantees to creditors for debts incurred by the company and as such, may become liable for some company debts once the liquidation commences.

Role & Powers of the Liquidator
Once the liquidation has commenced, the liquidator takes control of the company’s assets and affairs and is the only one with the power to bind the company. In general, the liquidator will:
  • Identify, secure and realise the company’s assets
  • Investigate the failure of the company
  • Identify any transactions that may be void
  • Report to creditors and hold meetings
  • Report to the Australian Securities and Investments Commission (ASIC) on any offences committed by company officers
  • Distribute any company assets to creditors
  • Apply to ASIC to deregister the company
Reports & Meetings
During the course of the liquidation, the liquidator is required to issue the following reports and hold the following meetings:
Purpose Report Timing Meeting Timing
Initial Report & Meeting Within 11 days after appointment 7 days after notice
Annual Report / Annual Meeting* Within 3 months of the anniversary of the appointment 14 days after notice
Final Report / Final Meeting# At completion of the winding up 14 days after notice


* For appointments commencing after 1 January 2007, a liquidator may lodge a report with ASIC in lieu of calling an annual meeting of creditors.

# A liquidator is not required to call a final meeting of creditors if there are insufficient funds in the liquidation to convene the meeting.

How does the Liquidator get paid?
A liquidator’s fees receive a priority under the Corporations Act from funds received from realising company assets. A liquidator cannot draw fees without the prior approval of creditors or the court.
What is the outcome of the process?

Once all assets have been realised, investigations are completed and distributions to creditors are made, the liquidator will apply to ASIC for the company to be deregistered. Creditors will no longer have any claim against the company and the company will no longer exist.

Contact Us

If you would like more information on how our corporate insolvency team can assist you, please contact one of our expert advisors.



Our Corporate Insolvency Experts

If you have any questions relating to our Corporate Insolvency services, please contact one of our expert advisors.


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