Court liquidation

Facts about court liquidation options


Learn the facts about court and voluntary liquidation procedures.


What is court liquidation? A court liquidation involves one or more of your creditors petitioning the court to have your company forced into liquidation so that outstanding debts can be repaid by selling company assets. A creditor can only issue a winding up application if you have failed to pay a debt after a formal payment demand has been made. If the court orders that your company be placed into liquidation, a Registered Liquidator will be appointed and your powers as a director will cease. The liquidator will investigate the affairs of the company and take action to recover funds for the benefit of creditors. This includes the sale assets, recovery of debts due to the company by suppliers and related parties (if applicable) and recovering voidable transactions such as preference payments or unreasonable director related transactions. After the liquidator has finalised the liquidation of the company, your company will be dissolved: the company will cease to exist and will be struck off the register within 3 months of the conclusion of the liquidation. Alternatives to avoid a court liquidation are discussed below.


Be sure to only take advice from a registered insolvency practitioner and not a broker who may look to charge unnecessary upfront fees.


Creditors voluntary liquidation (CVL) If a winding up application has not yet been issued against your company, or if the application has been served within the past few days, you still may have time to formally propose a creditors voluntary liquidation (CVL) with the help of a registered insolvency practitioner (IP). The IP will provide advice as to the consequences and process of the CVL.


IPs are legally obliged to act in the best interests of an insolvent company’s creditors, your lenders, the bank, and the ATO. For further information on CVL’s, please click here.


Emergency financing If you’ve received a formal demand for payment or creditors are threatening liquidation, but you have not been served a winding up application, you may still have time to seek emergency financing. This option may seem unrealistic to a company that has poor credit and significant debts, but guided by an expert, you may be able to raise funds through asset-based financing methods provided your company has valuable assets that can be used as collateral. Also, if you have outstanding invoice payments with clients who have a reliable history of paying, you may be able to get a cash advance through invoice discounting or factoring. For further information on emergency financing, please click here.


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