The Process of Voluntary Liquidation

When well-planned and soundly executed, most businesses tend to perform well. However,
either due to mismanagement or economic factors, businesses sometime fall into hard
times. Sales decline to the extent it barely covers or does not cover even the wage bill. Cash
reserves are used and reduced to zero. When all management efforts fail to revive the
business, rather than let it bleed, voluntary liquidation is the best legal option.
Voluntary Liquidation of a
business
is
the
orderly
dismantling of the company
property and resource to ensure
a fair distribution of the
company's
assets
to
its
creditors. Voluntary liquidation
also requires an investigation to
be conducted to ascertain that
the failure of the business and
resultant losses to the creditors,
staff and others was not caused
as a result of mismanagement of
the company resources.
In a voluntary liquidation, the
members of board of the
company, pass a resolution
deciding to liquidate the
company or business. Nobody
forces them to do it. The core
management team decided it to
do it.
In an involuntary liquidation, the creditors approach the court which in turn goes into the
merits of the complaint and on the basis of evidence presented, may decide to order the
business to be liquidated and will also appoint a liquidator.
If according to the company's finance experts, there isn't enough cash reserves and even
encashing some or all semi-liquid assets will not cover outstanding expenses and payments
then, they will recommend voluntary liquidation of the business to the board. The board
then passes the appropriate resolution.
Further, based on the finance experts recommendation, an external liquidator is selected
and a resolution passed appointing the liquidator to begin and complete the liquidation
process. Once the selected liquidator receives the communication and accepts the position,
the management ceases to exist and the liquidator takes over everything. Of course, if the
creditors of the company do not have faith the appointed liquidator, they can ask for a
change.
There are two types of liquidators liquidators who are registered with ASIC and
liquidators registered with the Courts; these latter class can take court ordered liquidation.
But both these types can accept voluntary liquidation appointment.

Once appointed, a liquidator will catalogue all assets of the business. The liquidator will
not only go through the books to locate the assets, he or she will visit the premises and
investigate if there are any uncatalogued assets. Once the list is finalized, reports are
prepared and shared with the ASIC and the creditors of the business.
All these assets moveable and immoveable will be sold at the best price possible. Assets
also mean recovering dues from debtors. Once the money is collected, the liquidator will
derive a formulae on how the funds will be distributed. A meeting of the creditors will be
held. If all creditors can be paid and there are still funds available, the shareholders will be
informed and they too will receive a share based on a formulae. Finally, the liquidator will
apply for deregistering the company. During all this, the liquidator will also investigate if
there was any mismanagement or misappropriation that resulted in the business going
bust. One of the most respected liquidators in Australia are the
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