Company Liquidation Concept. File And Tabs With The Words Insolv
Credit: Company liquidation concept. File and tabs with the words insolvency, creditors and debts. 3D illustration
Unfortunately with the economic fallout of
COVID-19, we’re likely to see an increase in businesses going into liquidation.
If a business which goes into liquidation owes your business money, will you
ever see that debt repaid?
does it mean when a company “goes into liquidation”?
When a company can no longer pay its debts it
is considered to be insolvent and will be liquidated. Independent liquidators
will be appointed to wind up the company, sell its assets and pay its debts.
debt be a priority?
Unfortunately, there is no guarantee that your debt will be repaid. If there is not enough money left over once assets are sold, not all debts will be repaid in full.
There is an order of priority for how debts
outstanding employee wages and superannuation
outstanding employee leave payments
A secured creditor is someone who has a “security interest”, such as a mortgage, in the company’s assets. An unsecured creditor does not. Secured creditors will be prioritised over unsecured creditors when repaying debts.
action can I take as an unsecured creditor?
Unfortunately, you cannot commence legal action against a company in liquidation. Instead, you will need to contact the liquidator to ensure you have been recognised as a creditor and are updated on the proceedings.
The liquidator will require you to complete formal proof of debt form and provide any accompanying documentation on the debt.
Find out when creditor meetings will be held and attend them. In these meetings, creditors will be asked to approve the liquidator’s activities. Get access to any creditor reports. Ensure you are up-to-date on the progress of the liquidation process and whether your debt is likely to be repaid.
will my debt be repaid?
If the liquidator is able to recover enough
money from selling the company’s assets to pay off all debts including
unsecured creditors, your debt may be paid. If there aren’t enough funds to pay
all unsecured creditors, the remaining money will be distributed on a pro rata
basis. Unfortunately, often there isn’t enough money remaining to pay off
unsecured debts in full or at all.
become a secured creditor?
If a company is already in liquidation, it is
too late to become a secured creditor. However, there are steps you can take to
avoid this in future with other debtors.
In 2009 the Commonwealth Government’s Personal Property Securities Register (PPSR) was introduced. With the PPSR, businesses can register their security interests in personal property other than land. This ensures you become a secured creditor if the company is liquidated down the track and ensures your debt is a higher priority.