A Creditors’ Voluntary Liquidation or CVL occurs when a company’s Directors and Shareholders agree to liquidate the company and appoint a liquidator.
Liquidation is the process used to wind up a Company's affairs and bring its existence to an end.
A CVL is a process which allows for the winding up of a company’s affairs without the need for court intervention.
It can occur at the end of a voluntary administration if creditors vote for the company to be liquidated or when/if a deed of company arrangement (DOCA) has been terminated.
A CVL comes into play when a company’s Directors and Shareholders determine that it can no longer meet its debt payments and is either insolvent or likely to become insolvent.
The CVL is implemented by those Directors and Shareholders via a series of meetings.
Other factors including actions be the ATO or the Directors at risk of insolvent trading can put pressure on companies to take this course of action.
This type of insolvency provides for an orderly realisation and distribution of a company’s assets among its creditors and allows for investigations into the reasons behind the company’s failure.
The effect on a company in a CVL is the same as in a Court Appointed Liquidation.
Once a Company is placed into Liquidation, unsecured Creditors cannot continue recovery action against the company unless they obtain the leave of the Court.
Liquidation does not, however, limit the rights of Creditors to pursue Guarantors of the Company’s
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