Are you a creditor of a company that is now in liquidation or deregistered? You may be concerned about your rights to get your money back under Australian law. Before anything else, you need to establish whether you’re a secured or unsecured creditor.
Secured vs unsecured creditors
If you’re a secured creditor, you will have a security interest, such as a mortgage, over some or all of a company’s assets. This means that if the company doesn’t pay their debt, you can at least get the asset from them.
If you’re an unsecured creditor, you won’t have a security interest in any of the assets of the company. Without any collateral, an unsecured creditor has taken on more risk than a secured creditor.
The role of a liquidator
When a business is liquidated, a liquidator is appointed. This person is responsible for assessing the company’s assets, selling them, reporting to ASIC and creditors, and distributing funds. After the company’s assets are sold, any secured creditors will be paid before unsecured creditors.
The liquidator also has the power to recover unfair preference payments and distribute them fairly between creditors. Unfair preference payments are voidable transactions found in the Corporations Act 2001 (Cth). These payments are insolvent transactions that the company has made to individual creditors during the six month period leading up to the start of liquidation.
They are deemed unfair because these kinds of transactions put the creditors receiving them in a much better position than the other unsecured creditors.
Legal advice regarding liquidation
Not all payments in the six months before liquidation are classed as unfair preference payments, so it’s important to look at the defences in the Corporations Act 2001 to see if your transaction is voidable or not.
If you’re a creditor and you want to get your money back from a liquidated company, you may want to speak to a lawyer who specialises in debt, bankruptcy and commercial law to understand your rights.