In certain circumstances Unsecured Creditors are unsure of their position when a company they have supplied goods to is declared insolvent. This is particularly the case when small businesses are affected through the winding up of a major debtor.
The immediate reactions of many small business owners who discover a major client has gone under is to write the debt off immediately. Furthermore there is often a feeling of helplessness and that the ‘little guy’ has no rights at all. This however is not the case and all Unsecured Creditors are provided the same protection under the Corporations Law regardless of the size of the business or the quantity of the debt. There are in fact a number of proactive choices that can be taken by an Unsecured Creditor in order to include themselves actively in the process of winding up.
The rights of Unsecured Creditors include:
- a share in any available funds, but only after costs of liquidation, priority payments and in particular, the Secured Creditors have been paid
- an opportunity to take part in choosing the Liquidator in a Creditor’s Voluntary Winding Up
- attending and vote at meetings of creditors on various matters, including the fixing of the liquidation’s remuneration
- taking part in the appointment and be a member of a Committee of Inspection
- receiving information about the liquidation of the company including the sale of its assets and the way in which the proceeds are distributed.
In limited circumstances, a creditor may sue a Director for the company’s losses if the company kept trading while unable to pay its debts on time.
We would encourage Unsecured Creditors to:
- call the Liquidator to ascertain the progress in the winding up of the company and to ask questions and learn about the company’s affairs
- provide information to the Liquidator that can assist in their investigations
- lodge a Proof of Debt with the Liquidator
- attend all meetings called by the Liquidator of the company including the AGM and subsequent Creditors Meetings
- be a Member of the Committee of inspection. This group provides a guide for the Liquidator to the general views of creditors as a whole.
Creditors may also obtain a copy of the receiver’s or liquidation’s six monthly statement of receipts and payments from any ASIC Business Centre
Macks Advisory is a firm that practices exclusively in the areas of insolvency and business reconstruction and members with queries are invited to contact Peter Macks on 08 8231 3323 or to [email protected]