National Wholesale Liquidators

Image Courtesy:img.ehowcdn.co.uk/

National Wholesale Liquidators

The liquidator’s role

When a company is being liquidated because it is insolvent, the liquidator has a duty to all the company’s creditors. The liquidator’s role is to:

• collect, protect and realise the company’s assets

• investigate and report to creditors about the company’s affairs, including any unfair preferences which may be
recoverable, any uncommercial transactions which may be set aside, and any possible claims against the
company’s officers

• enquire into the failure of the company and possible offences by people involved with the company and report
to ASIC

• after payment of the costs of the liquidation, distribute the proceeds of realisation—first to priority creditors,
including employees, and then to unsecured creditors, and

• apply for deregistration of the company on completion of the liquidation. Except for lodging documents and reports required under the Corporations Act 2001 (Corporations Act), a liquidator is not required to do any work unless there are enough assets to pay their costs.

If the company is without sufficient assets, one or more creditors may agree to reimburse a liquidator’s costs and expenses of taking action to recover further assets for the benefit of creditors. In this case, if additional assets are recovered, the liquidator or particular creditor can apply to the court for the creditor to be compensated for the risk involved in funding the liquidator’s recovery action.

Recoveries from creditors A liquidator has the ability to recover, for the benefit of all creditors, certain payments (known as unfair preferences) made by the company to individual creditors in the 6 months before the start of
the liquidation.

Broadly, a creditor receives an unfair preference if, during the 6 months prior to liquidation, the company is insolvent, the creditor suspects the company is insolvent, and receives payment of their debt (or part of it) ahead of other creditors. To be an unfair preference, the payment must put the creditor receiving it in a more
favourable position than other unsecured creditors.

Not all payments from the company to a creditor in the 6 months before liquidation are unfair preferences. The Corporations Act provides various defences to an unfair preference claim.

If a liquidator seeks to recover a payment that has been made to you, you may wish to obtain independent legal advice on the merits of the liquidator’s claim before repaying any money.

Creditors’ meetings

A liquidator may call a creditors’ meeting from time to time to inform creditors of the progress of the liquidation, to find out their wishes on a particular matter or seek approval of the liquidator’s fees. You may also use a creditors’ meeting to ask questions about the liquidation and inform the liquidator about your knowledge of the company’s affairs.

In a court liquidation, the liquidator is not required to call a creditors’ meeting unless a matter requires creditor approval. The only exception is that if the creditors pass a resolution requiring a creditors’ meeting to be called, or at least one-tenth in value of all the creditors request the liquidator in writing to do so, the liquidator must call a creditors’ meeting. However, it is unusual for this to happen, as those who make the request or pass the resolution must pay the costs of calling and holding the meeting.

In a creditors’ voluntary liquidation, a meeting of the creditors must be held annually and a joint meeting of the
creditors and members must be held at the end of the winding up. Creditors can require the liquidator to call a creditors’ meeting at other times, the same as in a court liquidation, as long as they pay the associated costs.

The chairperson of a creditors’ meeting (usually the liquidator or one of their senior staff) must prepare minutes of the meeting and a record of those who were present at the meeting and lodge them with ASIC within one month. A copy may be obtained from any ASIC Business Centre on payment of the relevant fee.

Article Courtesy: http://www.tendee.com.au/liquid.pdf

Technorati Tags: national wholesale liquidators