What is a creditors’ voluntary liquidation?
A creditors’ voluntary liquidation takes place when the directors of a company decide that the company is insolvent and cannot continue operating.
When does a creditors’ voluntary liquidation take place?
A creditors’ voluntary liquidation might take place:
- when the company has ceased to trade
- when the company wishes to cease to trade
- in order to ensure that the directors don’t breach the Corporations Act 2001 by allowing the company to trade while insolvent.
The creditors play a more active role in the process because members and directors are essentially excluded from involvement in the winding up of the company.
How does a creditors’ voluntary liquidation take place?
A creditors’ voluntary liquidation of an insolvent company begins in one of two ways:
- The creditors vote for liquidation following a voluntary administration or a terminated deed of company arrangement.
- The shareholders resolve to liquidate the company and appoint a liquidator.
What is the role of the liquidator in a creditors’ voluntary liquidation?
The main role of the liquidator is to take possession of and realise the company’s assets, so that surplus funds can be distributed to creditors.
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