As an insolvency practitioner, I occasionally see the impact that shadow and de facto directors can have on companies.
Section 461(k) of the Corporations Act 2001 (Cth) is a discretionary power of the court to order the winding
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The simplified liquidation regime commenced on 1 January 2021, partly in response to the challenges put on small businesses as a result of the COVID-19 pandemic and also in recognition of the need to introduce a formal, yet streamlined liquidation process for small and medium enterprises (SMEs) with liabilities of less than $1M.
At HLB Mann Judd Insolvency, both Kim Wallman and Greg Quin are Registered Liquidators and meet the requirements to conduct simplified liquidations. They are both well placed to assist directors of SMEs with understanding this new type of insolvency appointment.
The eligibility criteria for a company to enter into a simplified liquidation appointment are as follows –
- The company must pass a special resolution that the company be wound up voluntarily
- The directors must give the Liquidator a report concerning the company’s affairs and a written declaration that the company will be eligible for the simplified liquidation process
- The company must be insolvent
- The company’s total liabilities must not exceed $1M
- No person who is a director of the company can have been involved with another company that has used the small business restructuring process or simplified liquidation in the 7 years immediately preceding the appointment of the Liquidator
- The company’s tax lodgements must be up to date
The simplified liquidation is envisaged to do away with a number of statutory processes that are somewhat burdensome and costly, but commonplace with mainstream liquidations. Some of these time, and therefore cost savings, are already in force after the reforms that took place in 2017.
The streamlined processes include –
- No requirement to convene a meeting of creditors, rather utilising the ‘proposals without meetings’ procedures for creditors to vote on resolutions put forward by the Liquidator
- Creditors will be unable to appoint a Committee of Inspection
- Reduced investigatory duties for the Liquidator and reporting to the Australian Securities & Investments Commission
- Reduced scope for a Liquidator to recover voidable transactions (i.e. restrictions on unfair preference payment recoveries)
- A simplified dividend declaration and distribution process
To speak with us further regarding whether Simplified Creditors’ Voluntary Liquidation may be appropriate in your situation, please contact us on 08 9215 7900 for a cost and obligation free consultation.