What Do I Do If a Company That Owes Me Money Goes Into Liquidation?

What Do I Do If a Company That Owes Me Money Goes Into Liquidation?

What is liquidation?

When a company is no longer able to pay its debts as and when they fall due and payable under the most common legal definition of solvency, it has become insolvent and is no longer able to continue trading. In many jurisdictions if a company continues to trade it is a serious offense known as trading while insolvent. At some stage, when a company has become insolvent either through a voluntary process or at the behest of one or more of the creditors of the company it will be wound up and put into liquidation.

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This means that the company is now no longer under the control of the directors, shareholders, board or management of the company and is now under the control of the liquidator who has a legal responsibility to work in the interests of the creditors that appointed them. The liquidator will gather the remaining assets of the company and sell them off to get as much money as possible together to pay the creditors in the order of preference that they are supposed to be paid.

What Do I Do If a Company That Owes Me Money Goes Into Liquidation?

What do I do if the company owed me money before it went into liquidation?

This depends on a few different factors. If you were a secured creditor you are more likely to get your money back than an unsecured creditor. To have secured creditor status you would normally be a creditor which has loaned the company money under a deed and may have taken an ASIC charge over the assets of the company as security. In some cases employees may be secured creditors or trade creditors (people or orgnaisations which have sold the company goods or services and have not been paid).

Also, in over 80% of liquidations, the ATO is owed money and although it no longer has secured creditor status in a liquidation will still continue to pursue the debt. When you are the creditor of a company that has gone into liquidation, you need to file a proof of debt with the liquidator which is valid under the terms of the Corporations Act 2001 (Cth). This will mean that your stake as a creditor will be recognised in the legal aspects of the liquidation and that you will have the rights to attend the creditors meetings and vote according to your rights at the meeting of creditors.

What Do I Do If a Company That Owes Me Money Goes Into Liquidation?