Who is a Liquidator: A Complete Guide for Creditors

Written by

Raja Abbas

Liquidating a business is the first step in closing business affairs. Whilst liquidation may sound easy in practice, it can be hard for business owners to undergo, and can be frustrating for creditors such as banks, suppliers or individuals who are involved in the business. Liquidators have a duty to act in the best interests of creditors when selling business assets.  Depending on the circumstances that have led to a business being wound up, liquidation may be voluntary or involuntary. Knowing the steps that will take place to a business you have invested in is important as assigning a liquidator to sell business assets requires a process. This article will assist you in understanding the process and provide clarity on how liquidators operate.

Table of Contents

Who is a Liquidator 

Liquidators are individuals who act on behalf of a business to sell their assets. This process of realising these assets is called liquidation. Liquidators are licensed individuals and are a legal entity registered by Australian Securities & Investments Commission (ASIC). They are granted full authority by business owners to generate cash through the selling of assets. As a creditor, liquidators sell the assets of a business to pay off debts which are owed to you by the business owners who were unable to meet their financial obligations.

What are the Powers and Responsibilities of a Liquidator?

Powers & Responsibilities Include: 

  • Having a fiduciary duty by acting on behalf of the business to sell the assets for a business.
  • Distributing money to creditors which the business owes money to, such as banks. 
  • Assess the company’s financial statements, loans and invoices to determine the time frame and price in which assets are sold. 
  • Bringing and defending lawsuits if necessary.
  • Winding up the business in the smoothest way possible. 

Who can Appoint a Liquidator at a Company?

The Corporations Act 2001 (Clth) states that Courts have the right to appoint a liquidator after an application to wind up the business has been filed. Liquidators are typically appointed by the Courts, however, a director-initiated liquidation may lead to business owners appointing a liquidator themselves. 

Who appoints a liquidator at a company is reliant on the circumstances surrounding the type of liquidation that is taking place. Liquidators will be appointed by a judge if the liquidation is involuntary and Court initiated.

In circumstances of voluntary liquidation, directors will hold a meeting to vote on whether or not the business should enter liquidation. The directors can then appoint a liquidator at this time.

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Who is a Provisional Liquidator?

Provisional liquidators are assigned by courts to safeguard company assets until the liquidation of the business commences. Provisional liquidators differ from regular liquidators as they do not distribute assets. Instead, they preserve the assets of a company by taking possession of them. This is to ensure that the debts, such as money owed to creditors, are not jeopardised by generating cash without a liquidator being assigned.  

The Corporations Act 2001 (Clth) states that provisional liquidators can be appointed by the Court at any time after an application to wind up a business has been made, but before the winding up process begins. The powers of business directors are given to provisional liquidators during this period of time where they take on the role of preserving assets. 

Provisional liquidators do not realise company assets or initiate the winding up process of a company, however, they may fulfil the investigative functions of official liquidators. In response, the provisional liquidator is often then appointed to be the official liquidator for a business and consequently, will begin to realise assets and wind up the business. 

Provisional liquidation will be ceased by the Court once an official liquidator has been appointed, and the liquidation process commences.

How is a Liquidator Paid?

The cost of a liquidator can be based on:

  • A time based/hourly rate.
  • A fixed fee (which must be approved by the Court).
  • A set percentage.
  • A contingent agreement which relies on the liquidator achieving a specific outcome, such as asset realisation, that was agreed upon by both the liquidator and directors. 

Liquidators are often paid from the money generated when performing the realisation of business assets and will pay themselves first. They can also be paid by businesses with any remaining cash they have in the bank. The average cost of liquidating a small business in Australia is around $4000 to $8000 but may vary depending on the volume of assets. If you’d like an estimated cost to liquidate your business, Lawpath may be able to offer help. If you’d like an estimated cost to liquidate your business Lawpath may be able to help.

In circumstances where the business cannot afford the cost of a liquidator, directors and shareholders will pay themselves. Liquidators pay themselves first, followed by secured creditors, employees and shareholders. 

Do You Have to Deal Directly With a Liquidator?

Liquidators are usually appointed by the Courts, meaning business owners do not need to directly deal or appoint a liquidator to the business. A director-initiated liquidation usually requires a meeting to be held in which they vote on winding up the business or not. A liquidator may also be appointed during this process. 

As a creditor, liquidators act independently and will prioritise achieving the financial obligations that shareholders could not meet. If you have investments in a company undergoing liquidation, the business owners are required to assist liquidators in this process to ensure your interests are prioritised. 

Business owners will assist liquidators by:

  • Providing company books and records of cash flow.
  • Reporting to liquidators with any information that may assist them during the realisation of assets.
  • Informing liquidators on all debts the business has and any unsecured creditors.
  • Advise the liquidator about all company property and its location. 
  • Provide a Report on Company Affairs and Property (ROCAP) before the liquidator is appointed.


Is a Liquidator an Accountant?

Liquidators are a type of accountant who specialises in the liquidation of businesses. They are registered accountants, either with ASIC or by Courts. It is important to note that not all accountants are able to liquidate a business unless they specialise in liquidating businesses. Liquidators have a more niche role than general accountants, specialising in the selling of business assets.

What is the Difference Between a Liquidator and a Director?

Liquidators and directors are different, however they are interdependent on each other. During liquidation, directors are stripped of their power to run their company, however, this does not mean they cease communicating with the appointed liquidator and business stakeholders. Directors will often assist liquidators by providing financial records and statements to promote a smooth liquidation. Whilst a director may enter voluntary liquidation, only licensed insolvency practitioners can liquidate the business.

What is the Difference Between a Liquidator and an Administrator?

Administration and liquidation parallel each other, however are different processes. Administrators will investigate a business’s affairs and strategize how to continue operation, or determine the business’s insolvency. Administrators seek to rescue areas of the business which are feasible to continue operations in the hopes to prevent liquidation. Administrators have the power to determine if liquidation is necessary, which would proceed to a liquidator being appointed.

Liquidators do not attempt to rescue a company the way administrators do as liquidation is the process of realising assets after a business’s insolvency. If you are unsure about your business’s solvency, it is best to seek advice from an administrative lawyer. 

What are Employees Entitled to During a Business’s Liquidation?

Employees have entitlements during the liquidation of a business. Oftentimes, businesses who are liquidating are unable to fulfil employee entitlements. The Fair Entitlements Guarantee (FEG) sets out the entitlements of employees which can be provided by the government if the business is unable to provide such entitlements. These include outstanding wages and redundancy pay.


Liquidators play an important role in the winding up of businesses and ensuring creditors are paid. In general, liquidators are often assigned by Courts to promote a quick and smooth transition into closing a business and paying off their debts. In some circumstances, businesses can be assigned a provisional liquidator to prevent assets from being sold without a liquidator present. The way liquidators are paid can vary from hourly rates, fixed fees or percentages. Liquidators have the creditor’s interest as a priority when realising a business’s assets. It is always best to seek a lawyer if you are uncertain about your role in liquidating a business.

Are you owed money by a business or want further clarification about liquidating? Lawpath may  be able to help you

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