Creditors’ Voluntary Liquidation (CVL) is a formal process used to wind up a company that can no longer meet its financial obligations. Unlike court ordered liquidation, a CVL is initiated by the company’s directors and shareholders once efforts to trade out of financial difficulty have been exhausted.
Although it is often the most appropriate step when a business is no longer viable, entering voluntary liquidation can be a difficult decision. At HLB Mann Judd Insolvency WA, our team facilitate a structured and lawful process that maximises returns to creditors and maintains compliance, giving directors peace of mind in a stressful moment.
When is a CVL the Right Option?
A CVL may be suitable if:
A company is unable to pay its debts as they fall due
A company is receiving increasing pressure from creditors, including statutory demands
The business has ceased trading or is no longer financially sustainable
Directors want to avoid the cost, uncertainty and reputational impact of a court ordered liquidation
Directors wish to proactively meet their obligations and minimise personal risk
It is critical that directors act early. That gives time to avoid more serious consequences (like insolvent trading allegations or ASIC investigations) and allows for extended planning in what is a complex and sensitive situation.
How the CVL Process Works
A creditors’ voluntary winding up is guided by a clearly regulated process. It typically involves the following steps:
1. Board resolution
Directors resolve that the company is insolvent or likely to become insolvent.
2. Shareholder meeting
Shareholders pass a special resolution to wind up the company and appoint a registered liquidator (such as HLB Mann Judd Insolvency WA).
3. Notice to creditors
Creditors receive notice of the liquidation and are invited to lodge a proof of debt. The liquidator may also call a creditor's meeting or issue regular reports.
4. Liquidator assumes control
The liquidator takes over the management of the company, realises available assets and investigates the company’s affairs. That will include any potential misconduct or insolvent trading by directors.
5. Asset realisation and distributions
Proceeds from the sale of assets are distributed to creditors according to priority. Under the Corporations Act, that will typically begin with employee entitlements, secured creditors and then unsecured creditors.
6. Finalisation and deregistration
When liquidation is complete and all statutory obligations fulfilled, the liquidator finalises reporting to ASIC and the business is deregistered. There is no set timeframe for the CVL process. Depending on the company's size, complexity and financial position, it can take as long as 12 months.
What Directors and Creditors Should Know
Entering into voluntary liquidation is a very different experience for directors and creditors. If you are involved, you can expect
For Directors:
You relinquish control of the company when the liquidator is appointed
You are legally required to cooperate fully and provide company records, financial statements and other details
The liquidator may examine transactions prior to liquidation, particularly those involving related parties or the liquidation of assets
You may face scrutiny for insolvent trading if the company continued to operate while unable to pay its debts
Acting early and cooperating is the best way to reduce personal risk.
For Creditors:
You may lodge a proof of debt with the liquidator to participate in any distribution of available funds
You will receive regular reports from the liquidator and may be invited to vote on key decisions
Secured creditors (such as banks) have priority over specific assets, while employees and the ATO may also have priority claims
Unsecured creditors will receive a distribution if sufficient funds remain after priority debts and costs are paid
If you are a creditor unsure of your entitlements, our team can offer expert advice and guide your approach.
HLB Mann Judd Insolvency WA’s Role in Creditors' Voluntary Liquidation
At HLB Mann Judd Insolvency WA, we have managed Creditors’ Voluntary Liquidations across a wide range of industries and circumstances. As registered liquidators we:
Assess the company’s position and help directors understand their obligations
Communicate clearly with creditors, employees and regulatory bodies
Conduct thorough investigations where required by law
Realise assets in a fair and transparent manner, distributing funds according to priorities
Finalise and deregister the company at the end of the process
We can also work closely with stakeholders and their advisors prior to liquidation, offering practical advice as to whether CVL is the most suitable option.
Contact Us and Arrange a Free, No Obligation Consultation
If your company is under financial pressure and you’re unsure whether liquidation is the right next step, we can help. Our team offers confidential, obligation free consultations to assess your situation and outline your options.
To speak with us further regarding a Creditors’ Voluntary Liquidation, please arrange a cost and obligation free consultation.
If you decide CVL is not the most appropriate avenue, we can also assist with:
CL advice for creditors and directors
