Cost anxiety can be a real concern if you’re looking at putting your business into voluntary liquidation – “I’m already in debt; how will I pay?”
This is a fair and important question for any director to ask before committing, but there isn’t one direct answer. That’s because voluntary liquidation costs here in Australia depend on several factors.
To help you get a decent idea, we’ve covered what the costs include, the important distinction between asset-funded and director-funded liquidations, and the questions to ask a liquidator.
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What does voluntary liquidation involve?
Voluntary liquidation is a formal process of closing an insolvent company carried out by a registered liquidator and overseen by the Australian Securities and Investments Commission (ASIC).
A creditors’ voluntary liquidation – the most common type – is kicked off by the company directors, who choose and appoint the liquidator.
The work of a liquidator, once appointed, typically includes:
Notifying creditors
Investigating company affairs
Realising assets
Distributing funds to creditors
Reporting to ASIC
Deregistering the business
The liquidator charges based on the time spent carrying out these tasks. This is the most important reason why costs vary.
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3 key costs of creditors’ voluntary liquidation
Liquidation fees in Australia aren’t only comprised of what the liquidator bills your business. They’re actually one of three components that make up the key voluntary liquidation costs.
Here’s a quick breakdown:
1. Liquidator fees
Liquidator fees make up the largest chunk of voluntary liquidation costs. Charged on a time-cost basis, the liquidator’s hourly rate is multiplied by the hours required. This means straightforward matters require fewer hours; complex matters require more.
2. Disbursements
Disbursements are the out-of-pocket administrative costs taken on by the liquidator during the work. These may include advertising, postage, storage, valuation fees, asset protection or sale costs, and process server costs. They’re generally passed on at cost.
3. ASIC lodgement fees
Australian Securities and Investments Committee (ASIC) lodgement fees are government fees that need to be paid for loading the required documents. These are regulated, not negotiable and a relatively small component of the total cost.
Factors that drive the full cost of liquidation
Here are some of the key variables that determine whether a creditors’voluntary liquidation is straightforward and affordable or complex and expensive.
Cost factor | What it means in practice |
Company complexity | The more creditors, the more complex the assets and financial history, the more work for the liquidator. A company with 200 creditors, mixed assets, and years of unreconciled accounts will cost far more to liquidate than one with three creditors and clean books. |
Volume and nature of assets | Realising assets takes time and expertise. If your company has significant plant, equipment, intellectual property, or is a going-concern business, it will involve more work. However, it may also generate more recoveries to fund those costs. |
Voidable transaction investigations | If the liquidator finds potentially voidable transactions, e.g., some creditors paid ahead of others, extra work may be needed to investigate and recover funds. This is more common when financial trouble developed gradually. |
Director cooperation | Liquidators are paid for their time. Delays in providing books, completing the Report as to Affairs (RATA) or responding to requests increase costs. Prompt, full cooperation is the best way to keep costs down. |
Number of creditors | Each of your creditors must be formally notified. Disputed creditor claims need assessment and sometimes adjudication. The more creditors, the more administrative work is involved. |
Whether there are realisable assets | In asset-funded liquidations, the liquidator’s fees are drawn from realisations. As a director, you may have little or no upfront costs to pay. In no-asset (or low-asset) liquidations, you may need to contribute towards costs. |
The last point in the table is a significant cost distinction in CVLs:
In asset-funded liquidations, fees come from the company’s assets, so directors usually pay little or nothing upfront. This is common when a business has plant, stock, debtors, or is sold as a going concern.
In director-funded or no-asset liquidations, directors typically cover the costs, either by agreement with the liquidator or a fixed-fee arrangement. Clarify this before appointment.
Cost of members' voluntary liquidation vs CVL
Members' voluntary liquidation (MVL) costs – where you decide to wrap up a solvent company – are a little different. Here’s a quick comparison:
CVL (creditors’ voluntary liquidation) | MVL (members’ voluntary liquidation) | |
Company solvency | Insolvent | Solvent |
Who funds costs | Asset realisations (primarily); directors may contribute where assets are insufficient | Funded from company surplus – directors typically bear no personal cost |
Liquidator’s role | Investigate, realise assets, distribute to creditors, report to ASIC | Wind up solvent affairs, distribute surplus to shareholders |
Typical cost drivers | Complexity, creditor volume, asset types, director cooperation | Simplicity of affairs, volume of distributions, shareholder count |
Relative cost | Varies widely – straightforward CVLs cost less; complex matters significantly more | Generally lower than CVL for equivalent company size. No creditor investigation required |
Importantly, MVL is only available to solvent companies – those that can pay all their company debts in full. If your company is insolvent, CVL is the most appropriate process, regardless of the cost preference.
If you’re unsure if your company is insolvent, speak to a registered insolvency practitioner before making any decision.
What to ask a liquidator about cost before appointment
Before appointing a liquidator, make sure you clarify their voluntary liquidation costs in Australia so there are no surprises down the track. Here are some pertinent questions to ask:
‘Is this likely to be an asset-funded or director-funded matter, based on what I’ve described?’
‘What’s your hourly rate, and can you give me a preliminary estimate of total hours for a matter like this?’
‘What are the likely disbursements, and how are they handled?’
‘If there are no realisable assets, is a fixed-fee arrangement available?’
A good liquidator will answer these questions clearly before you commit to anything. If they won’t engage with voluntary administration cost before appointment, that tells you something.
The bottom line of CVL costs
The cost of voluntary liquidation isn’t a straightforward question to answer and there’s no exact dollar figure.
The amount depends on the complexity of your company’s affairs. But if you have realisable assets, the out-of-pocket cost is lower than you might expect.
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