Small Business Restructuring › Simplified Liquidation
Simplified Liquidation Lawyers — A Faster, Lower-Cost Wind-Up for Small Companies.
Simplified liquidation (introduced in 2021) provides a faster, lower-cost creditors' voluntary liquidation process for eligible small companies with liabilities under $1 million. It reduces the liquidator's reporting and investigation obligations — making an orderly wind-up more affordable for small companies with limited assets. A lawyer advises on eligibility, the directors' declaration process, and the personal implications of the liquidation.
⚠ A director who makes a false declaration to access simplified liquidation commits an offence. Before making the declaration, directors must obtain legal advice confirming eligibility and the accuracy of the declaration. Get legal advice before proceeding.
Simplified Liquidation Matters We Handle
From eligibility advice to directors' personal liability — managing the wind-up.
Eligibility Assessment
Simplified liquidation is only available for creditors' voluntary liquidations of small companies with liabilities of $1 million or less. A lawyer assesses whether the company meets the eligibility criteria — including confirming that total liabilities are within the threshold and that the directors can make the required declaration without risk of a false declaration offence.
Directors' Declaration Advice
To access simplified liquidation, the directors must declare that: (1) the company's total liabilities do not exceed $1 million; (2) the company has not used the SBR process in the preceding 7 years; and (3) the liquidator has reasonable grounds to believe there are no voidable transactions or director misconduct. A lawyer advises on the accuracy of the declaration and the risk of a false declaration offence before the directors sign.
Liquidator Selection
The directors choose and appoint the liquidator in a creditors' voluntary liquidation. A lawyer advises on the selection of an appropriate liquidator for a simplified liquidation — one who has experience in the simplified process and who will administer the liquidation efficiently and at the lowest possible cost to maximise the return to creditors.
Director Personal Liability During Liquidation
Even in a simplified liquidation, directors remain exposed to personal liability — for insolvent trading, director penalty notices (DPNs), and voidable transactions where the director was a beneficiary. A lawyer advises directors on their personal liability position before and during the liquidation — and advises on defences where a liquidator subsequently brings personal liability claims.
Employee Entitlements
Employee entitlements — wages, annual leave, long service leave, and superannuation — are priority claims in a liquidation. The Fair Entitlements Guarantee (FEG) scheme provides a government safety net for employees whose entitlements cannot be paid by the company. A lawyer advises on the priority order for employee entitlement claims and the interaction with the FEG scheme.
Transitioning from Restructuring to Liquidation
Where a restructuring attempt — SBR or voluntary administration — is unsuccessful, the company may transition to liquidation. A lawyer manages the transition, advises on whether simplified liquidation is available (where the total liabilities remain within the threshold), and ensures the directors' personal liability exposure is minimised during the transition.
The Legal Framework
Simplified liquidation — Part 5.6 Corporations Act 2001 (as amended in 2021).
Eligibility — s500A Corporations Act 2001
Simplified liquidation is available for creditors' voluntary liquidations of small companies under s500A of the Corporations Act 2001 where: (1) the company's total liabilities do not exceed $1 million; (2) the company has not used the SBR process or simplified liquidation in the preceding 7 years; and (3) the liquidator has, at the time of the declaration, reasonable grounds to believe that the company has not engaged in voidable transactions, that there has been no misconduct by an officer, and that the company is not under investigation. A director who makes a declaration knowing these conditions are not met commits an offence.
Reduced obligations — faster and cheaper
In a simplified liquidation, the liquidator has reduced reporting and investigation obligations compared to a standard creditors' voluntary liquidation. The liquidator is not required to prepare a detailed report to ASIC on the company's affairs and the conduct of directors — reducing the time and cost of the liquidation. The liquidator is also not required to investigate voidable transactions (other than in limited circumstances). These reduced obligations make simplified liquidation significantly cheaper than a standard liquidation — important for small companies with limited assets where the cost of the liquidation would otherwise consume the assets available for distribution to creditors.
Priority of claims — s556
In a simplified liquidation, the priority order for the distribution of the company's assets follows the standard priority order under s556 of the Corporations Act 2001 — the same as in a standard creditors' voluntary liquidation. Priority claims (paid before unsecured creditors) include: the liquidator's remuneration and expenses; employee wages and superannuation; outstanding annual leave; and long service leave. Unsecured creditors — including the ATO (for income tax, GST, and PAYG) and trade creditors — are paid after priority claims, if any assets remain. In most small business liquidations, unsecured creditors receive little or nothing.
Transitioning out of simplified liquidation
The liquidator can exit simplified liquidation and revert to the standard liquidation process where they form the view that: (1) the company's total liabilities exceed $1 million; (2) the company has used the SBR process or simplified liquidation in the preceding 7 years; or (3) there are reasonable grounds to believe there are voidable transactions or director misconduct that should be investigated. Where the liquidator exits simplified liquidation, they resume the standard reporting and investigation obligations — and the cost of the liquidation increases accordingly.
Director obligations during liquidation
Directors have significant obligations during a liquidation — whether simplified or standard. Directors must cooperate with the liquidator, provide access to books and records, and deliver the company's property to the liquidator. A director who conceals assets, destroys records, or fails to cooperate with the liquidator commits an offence. A lawyer advises directors on their obligations during the liquidation and ensures they do not inadvertently commit an offence by failing to comply with the liquidator's requirements.
ATO debt in liquidation — priority and proof of debt
The ATO is typically a major creditor in small business liquidations — for unpaid GST, PAYG withholding, income tax, and superannuation guarantee charge. In liquidation, the ATO proves its debt by lodging a proof of debt with the liquidator. ATO debt for superannuation guarantee charge is a priority claim — paid before unsecured creditors. ATO debt for income tax, GST, and PAYG is an unsecured claim — paid pari passu with other unsecured creditors after priority claims. However, where the ATO has issued a director penalty notice (DPN) for unpaid PAYG or superannuation, the director remains personally liable for those amounts even after the company enters liquidation.
How It Works
One request. Free simplified liquidation advice.
Tell us the company's total liabilities, whether the company is eligible for simplified liquidation, and whether any ATO demands or DPNs have been received. A restructuring lawyer will advise on next steps.
Submit Your RequestDescribe the company's situation
Tell us total liabilities, whether restructuring has been attempted and failed, the nature of the creditors, whether DPNs have been received, and whether the business is still trading.
Matched to a restructuring lawyer
Your request is matched to a lawyer experienced in simplified liquidation and director liability — who can assess eligibility, advise on the directors' declaration, and identify the personal liability risks for the directors.
Free consultation
A lawyer contacts you for a free consultation — assessing eligibility, advising on the declaration process, and identifying the personal liability exposure of each director before the liquidation commences.