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RELATED INSIGHTS

Navigating the process of a debtor’s liquidation can be complex, however understanding your rights as a claiming creditor can significantly simplify the process. Depending on the type of liquidation adopted, you may have the right to request meetings and or information. This allows creditors to stay informed and ensure the obligations of the debtor and liquidator are being acceptably fulfilled.

Rights During A Simplified Liquidation

If they meet eligibility criteria, some companies may be liquidated in a simplified process. This is generally a more cost effective method to wind-up a company due to the reduced investigation and reporting requirements.

For a simplified liquidation, eligibility criteria includes, but is not limited to:

  • Creditors voluntarily decided to wind-up the company
  • The winding up process began after 1 January 2021
  • The company’s liabilities are not in excess of $1 million
  • The company is unable to pay its creditors in full within 12 months

During a simplified liquidation process, a claiming creditor’s rights are generally limited to the right to request information only.

Rights During A Court-Ordered Liquidation

Meetings

Meetings of creditors are not automatically scheduled during the liquidation process; they must be requested. To be eligible to request a meeting, creditors must have claims of a certain value and submit their request to meet in writing.

Information

Liquidators have certain obligations that must be fulfilled in regards to the provision of information. This includes an initial notice of liquidation as well as a report within the first three months that outlines the likelihood of payment being made against the debt. 

Creditors are able to request additional information at any time. Providing that the request is reasonable, relevant and permissible under the liquidator’s duties, the liquidator must provide the requested information within five business days unless agreed otherwise.

Direction

If passed as a resolution at a meeting, creditors may give directions to the appointed liquidator. The liquidator must record their reasons if electing not to comply. Individual creditors cannot provide directors.

Appoint a Reviewing or Replacement Liquidator

If passed as a resolution at the meeting, creditors may appoint a reviewing or replacement liquidator. 

For an individual creditor to appoint a reviewing liquidator, they must cover the relevant costs and obtain the approval from the appointed liquidator.

For more information, go to the Australian Restructuring Insolvency & Turnaround Association.

Is your business in debt? Are you thinking of liquidating? With over 50 years of collective industry experience, our friendly team at Wisdom are experts at navigating liquidation and bankruptcy. We can assist you with appointing a liquidator and liaise with them throughout the process to ensure the best possible outcome for you.

To get started, contact us here today! 

References

  • ARITA. ‘The Liquidation Process’, Australian Restructuring Insolvency & Turnaround Association, Online, [No Date], https://www.arita.com.au/ARITA/Insolvency_help/The_liquidation_process.aspx (Accessed 17 August 2022)
  • ARITA. ‘Creditor Rights In Liquidations’, Australian Restructuring Insolvency & Turnaround Association, Online, 2017, https://www.arita.com.au/documents/Technical/Information-sheets/INFO-Creditor-rights-information-sheet-(Liq)-v1_1.pdf (Accessed 17 August 2022)

ASIC. ‘Simplified Liquidation’, Australian Securities and Investment Commission, Online, [2022], https://asic.gov.au/regulatory-resources/insolvency/insolvency-for-directors/simplified-liquidation/ (Accessed 17 August 2022)