Creditors' Voluntary Liquidation (CVL)

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  When should you consider a CVL?

  You should consider a Creditors’ Voluntary Liquidation if you are facing one or more of the following:

  • The company is unable to pay its debts as they fall due or is clearly insolvent.
  • You have received a statutory demand or a Director Penalty Notice (DPN) from the Australian Taxation Office.
  • There is no viable restructure, sale, or rescue option available and creditor pressure is escalating.
  • You need a timely and definitive end-point so you can move on with your business or personal affairs.

  A CVL provides a structured and compliant way to finalise the company’s affairs while ensuring directors take proactive steps to manage risk.

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  Why it’s important to act early as a director?

  When a company becomes insolvent, directors or business owners face several personal risks. Managing these risks early through a structured CVL can provide clarity and protection. Key considerations include:

  • Director liability: Insolvent trading, unresolved tax obligations—including DPNs—can place directors at personal risk if not addressed promptly.
  • Liquidator investigations: A liquidator will review transactions such as related-party dealings, unpaid superannuation, or unfair preferences. Acting early helps ensure records are accurate and reduces the likelihood of adverse findings.
  • Protection of future opportunities: Managing the insolvency process properly can help safeguard your professional reputation and support future business activities.
  • Reduced stress and uncertainty: Taking timely action gives directors a clear pathway forward and reduces the emotional and financial strain that often comes with creditor pressure.
  • Compliance and transparency: Maintaining accurate financial records and up-to-date lodgements ensures the CVL proceeds smoothly and avoids unnecessary complications.

  A proactive CVL helps directors manage both their obligations and their personal exposure, providing a structured end to a difficult situation.

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  How does the CVL process work?

  1. Initial review
     We begin with a review of the company’s financial position, director obligations, creditor pressure and any personal guarantees. This helps determine whether a CVL is the appropriate next step.

  2. Shareholder resolution and liquidator appointment
     Directors and shareholders pass a resolution to wind up the company and appoint a registered liquidator. From this point, the liquidator takes control of the company’s operations and affairs.

  3. Asset realisation and investigations
     The liquidator identifies and sells available assets, reviews past transactions such as related-party payments, preferences and potential insolvency issues, and assesses any outstanding debts owed to the company.

  4. Creditor claims and distributions
     Employee entitlements are addressed first, followed by secured creditors. Unsecured creditors lodge proofs of debt, and any available surplus is distributed according to the Corporations Act.

  5. Finalisation and deregistration
     Once investigations are complete and all distributions have been made, the liquidator applies to deregister the company. This formally finalises the liquidation and brings all compliance obligations to an end.

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  What questions should you ask?

  Before proceeding with a Creditors’ Voluntary Liquidation, it is important to consider the following:

  • Is the company trading while insolvent, or at risk of becoming insolvent?
  • What personal guarantees or Director Penalty Notices (DPNs) may expose me to personal liability?
  • Could a restructure, sale or controlled exit be a better option before committing to liquidation?
  • How might the liquidator’s review of pre-liquidation transactions affect me as a director?
  • Are my financial records, tax lodgements and employee obligations up to date?
  • What impact will a CVL have on my future business roles, licensing, or credit rating?

  Asking the right questions early helps ensure you choose the best path forward and manage your risks properly.

  Contact the de Jonge Read® team today for a no-cost, no-obligation discussion to understand your options.

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