Understanding Your Rights as a Creditor in Liquidation Proceedings
When a company enters liquidation in Australia, creditors play a crucial role in the process. Creditor rights in liquidation are very important, and, as a creditor, it’s essential to understand how you can protect your interests during liquidation proceedings.
With more than 30 years of experience in insolvency and company liquidation, the Liquidation Advisory Centre team will help you understand the rights of creditors during the company liquidation process and ensure that you are compliant and within the framework of the law. Here is our comprehensive guide to help you navigate your rights as a creditor:
Proof of Debt
This is an essential requirement because, to participate in the distribution of assets, all creditors must submit a formal Proof of Debt form to the appointed liquidator. This form outlines the amount and nature of the debt you are claiming from the company in liquidation. The Proof of Debt form establishes your claim and allows the liquidator to assess its validity and is an important part of Creditor rights in liquidation.
Priority of Payments
- Priority Order: All creditors are paid in a specific order of priority. Secured creditors with registered security interests are generally paid first, followed by company employees in liquidation. Certain entitlements, such as wages, superannuation, and other employee benefits, take priority. Then, unsecured creditors, such as suppliers, who have submitted a proof of debt form are paid.
Understanding the priority order during a company liquidation is crucial, as it determines your likelihood of receiving a dividend.
Liquidator’s Reports
- Access to Reports: As a creditor, you have the right to access all reports and updates provided by the liquidator. These reports detail the progress of the liquidation, including asset realisation and proposed distributions.
- Review and Involvement: Reviewing these reports and being fully aware of the process allows you to assess the liquidator’s actions and participate in decisions affecting the distribution of assets.
Voting Rights
- Meetings of Creditors: You may be invited to attend meetings of creditors, where important decisions are made regarding the liquidation. Your voting rights depend on the nature and value of your debt, but it is important to attend these meetings so you are fully aware of what is happening with the company liquidation process. Some meetings are held by post, so all you need to do is complete and return the form.
Active participation in these meetings allows you to express your creditor rights in liquidation and to influence the outcome of decisions, such as appointing a liquidator or approving an intended recovery action that will produce a greater return to creditors.
Objection to Disallowed Claims
- Objection Process: If the liquidator disallows your claim, you have the right to object to the decision. This objection must be made within a specified
- Resolution: Your objection will be reviewed, and a resolution will be reached regarding the validity of your claim.
Liquidator’s Investigations
- Right to Information: Creditors have the right to request information from the liquidator regarding the company’s affairs, transactions, and the conduct of directors.
- Protection of Interests: This information can help you protect your interests and potentially identify any actions that may warrant legal action.
- Company Knowledge: Cooperation and sharing knowledge of the company in liquidation could be of immense value to the liquidator. You may have sought statements of position from the directors, you may be aware of company assets not identified in the liquidation paperwork, or you may know personal habits of the company’s management that may assist the liquidator recover money for the benefit of creditors.
Legal Action
- Legal Remedies: If you believe that your rights as a creditor have been infringed or that the liquidation process is not being conducted properly, you have the right to complain to ASIC about the liquidator’s behaviour or actions. However, we recommend you voice your concerns with the liquidator in the first instance to see whether your concerns can be resolved satisfactorily.
- Consultation with Professionals: Consult with professionals specialising in insolvency and liquidation, such as the team at the Liquidation Advisory. We can help you understand your rights as a creditor and help you explore legal remedies.
Distribution of Assets
- Final Distribution: Creditors are entitled to receive their share of the company’s assets once all secured creditors and employee entitlements have been
- Proportional Payments: The distribution is typically proportional to the value of your proven debt, as submitted in your proof of debt form and the company’s available assets in liquidation.
Creditor Rights in Liquidation
Understanding your creditor rights in liquidation proceedings is vital for protecting your interests and maximising your chances of receiving payment. By actively participating in the process, submitting a Proof of Debt form, attending creditor meetings, and seeking professional advice when necessary, you can navigate the complexities of liquidation and ensure that your rights as a creditor are upheld.
If you have any questions, comments, or concerns about creditor rights in liquidation, please contact us for a free consultation.
Andrew Bell Liquidation Advisor
Let’s Talk
With over 30 years of experience in debt solutions and company liquidation in Australia, Andrew can find a solution for you.
“Nothing is more satisfying to me than knowing that I’ve helped someone get back on their feet by guiding them through the liquidation process. Rest assured, you’re in good hands with me as we solve your financial problems together.”