You’ve explored every option for your struggling business and have made the tough decision that creditors’ voluntary liquidation (CVL) is the best way forward.
Now it’s time to familiarise yourself with the process so you know what to expect.
This guide walks you through the CVL process step by step, covering what happens at each stage, how long it takes, what it costs and your obligations as a director.
Unsure where to start?
Try our Free Self-Assessment. See clearly what your options are.
What is creditors’ voluntary liquidation?
Creditors’ voluntary liquidation is a formal process under the Corporations Act 2001 (Cth) used to wind up a business that can’t meet its debts on time. Legally, this is called insolvency.
Unlike court-ordered liquidation, where a court forces you into liquidation following creditor legal proceedings, CVL is director-initiated. This means you choose voluntary liquidation to resolve your company’s financial distress.
CVL has two advantages over court liquidation: you decide when it starts and which liquidator to appoint.
A liquidator is an independent professional who closes your company and distributes its assets to creditors. They should be a trusted expert and a registered insolvency practitioner with the Australian Securities & Investments Commission (ASIC).
Once appointed, the liquidator takes control of your company and begins winding it up. From this point, your role as director shifts from running the business to cooperating with the process.
Ready to speak with a specialist?
Have a free, no obligation chat with one of our team. Clarify your options.
Creditors’ voluntary liquidation in 8 steps
To understand what the process involves, here’s a detailed look at what happens from moment you decide to enter creditors’ voluntary liquidation to the point of deregistration with ASIC.
Step | Stage | What happens |
1 | Director resolution | The board of directors officially agree your company is insolvent (or likely to become insolvent) and commits to wind things up voluntarily. This is a legal requirement, so ensure you document it properly. |
2 | Appoint a liquidator | You appoint a registered liquidator. This is one of the key advantages of CVL: you get to pick your own practitioner before creditors step in. Once the liquidator agrees, they’re effective immediately. |
3 | Notify creditors & ASIC | The liquidator lodges the required notices with ASIC and notifies known creditors within the required timeframes under the Corporations Act 2001 (Cth). A creditors’ meeting might be called, but under current rules, it isn’t always mandatory. |
4 | Directors complete RATA | You must complete a Report as to Affairs (RATA) – a formal declaration of your company’s financial position. This document is central to the liquidator’s investigation, so you need to cooperate fully and provide access to all books and records. |
5 | Liquidator investigates | The liquidator goes through your company’s financial affairs, checks how you (the directors) have handled things, looks for any voidable/questionable transactions (like unfair payments to creditors, underpriced asset sales, or gifts of company property before liquidation), and works out what assets can be sold. |
6 | Realise assets | The liquidator sells or otherwise realises any company assets. This may include plant and equipment, stock, debtors, intellectual property (IP), or the business itself as a going concern (meaning it’s sold as a running, operating business). The liquidator’s job is to get the best possible return for creditors. |
7 | Distribute funds | Proceeds are distributed to your company creditors in order of priority under the Corporations Act: secured creditors first, then employee entitlements (wages, leave, redundancy), then unsecured creditors, including the Australian Taxation Office (ATO). If funds aren’t enough to pay everyone in full, each group gets a proportional share. |
8 | Deregister with ASIC | Once your company liquidation is finalised, the liquidator lodges a final return with ASIC. Your company is deregistered and no longer exists as a legal entity. Your director’s obligations to the company end here. |
These eight steps give a clear overview of what the CVL process involves. But keep in mind that every CVL is different. The complexity of your situation will determine how involved some of these steps are.
If your company has straightforward affairs and few creditors, the process can be pretty smooth. Whatever the case, your liquidator will guide you through each stage.
How long does a creditors’ voluntary liquidation take?
It’s very normal to worry about timing in a liquidation scenario. A dragged-out voluntary liquidation process can be stressful. Your company affairs are in limbo, you might have concerns about personal liability, and costs can add up.
The answer to how long does voluntary liquidation take depends on the complexity of your affairs. As a guide, most straightforward CVLs finish within 3-6 months (Step 1- Step 8).
If things are complex – you have significant assets, creditor disputes, voidable transaction investigations or director conduct concerns – the voluntary liquidation process can take longer.
The bulk of the time in any CVL is spent on Step 5 and Step 6. The initial stages (Steps 1-4) happen within days.
What does voluntary liquidation cost?
When you’re already insolvent or facing insolvency, voluntary liquidation costs can be a concern. But these expenses help you wind things up properly and protect both you and your creditors.
The costs of CVL typically include:
Liquidator fees – What the liquidator charges for managing the process.
Disbursements – Out-of-pocket expenses, like advertising, postage or specialist reports.
ASIC lodgement fees – Official fees for filings with the Australian Securities and Investments Commission.
Like the timeframe, voluntary liquidation costs vary depending on the complexity of your business affairs – number of creditors, nature and volume of assets, and whether voidable transaction investigates are needed.
How can I pay for liquidator costs?
In many CVLs, a liquidator’s fees are paid from realised assets, keeping upfront costs lower than expected. No reliable assets? You may need to cover some or all of the costs. The liquidator should be transparent about this before they’re appointed.
Your obligations as a director during CVL
As mentioned, once you’ve appointed a liquidator, your role shifts from running your business to cooperating with the process. The liquidator now controls all assets – you can’t sell any. This is a key part of voluntary liquidation in Australia.
Cooperating with the process means:
Giving full access to your company’s books and records
Completing the RATA accurately and promptly
Attending any interviews the liquidator requests
Being transparent and responsive to reasonable requests
The liquidator's review isn’t just paperwork. They’re also assessing your conduct as a director or directors. This includes looking for:
Evidence of insolvent trading – Whether your company continued to take on debt while insolvent. Acting early reduces your exposure here.
Voidable transaction – Payments or transfers made by you before liquidation that could be recovered for creditors.
Other compliance matters – For example, for things such as Pay as You Go Withholding (PAYG) or super obligations that could trigger a director penalty notice (DPN).
We know that exposing your past decisions to scrutiny can be stressful. But if you’ve acted in good faith and sought advice early, it’s usually just a routine review rather than an automatic finding of personal liability.
Cooperating fully is essential if you’re looking to liquidate a company properly.
The controlled way: creditors’ voluntary winding
While liquidation may never have been a planned part of your company’s future, the creditors’ voluntary liquidation process is a structured and well-defined way to wind things up.
You opt to put your insolvent company into CVL and appoint a liquidator to manage the process control, rather than it being forced on you. Acting early can also help reduce liability risk, limit further losses and often keep costs lower.
Identify a clear path for your business. Know in minutes.
