Too often are Creditors seeing distressed businesses go bust and ending up in liquidation with nothing going back to Creditors and everything going to the Liquidator.
Under new insolvency laws, Creditors have been given more rights than ever before to influence the outcome of a Liquidation. Creditor now have the power to:
1.Request the Liquidator provide information, provide a report or produce a document
This requires a resolution of Creditors at a meeting or individually. The Liquidator must comply within 5 business days or an agreed further period unless:
- the information, report or document is not relevant to the Liquidation
- the Liquidator would breach their duties if they complied with the request
- the Liquidator determines it is not reasonable to comply with the request. There are rules that govern the Liquidator determining whether or not a request is reasonable. If the request is not reasonable, the Liquidator must notify the Creditor and set out reasons why the request is not reasonable.
2.Inspect books and records of the Liquidator
Liquidators’ books and records must comprise a complete and accurate record of their conduct of the Liquidation. These books and records are available for inspection by Creditors and Shareholders at the office of the Liquidator. Certain documents must be lodged by Liquidators with ASIC. Creditors can also obtain these from ASIC at a fee.
3.Inform the Liquidator of known matters relevant to the company in Liquidation
A Liquidator must undertake investigations into the company’s affairs and the conduct of the company’s director and other officers, including any shadow or de-facto director. Creditors are encouraged to provide a Liquidator with any information they have which might assist in the Liquidator’s investigations.
A Liquidator would then report to ASIC on his or her findings and ASIC will consider what further action to take. ASIC could ban a person from acting as a company director for a period of time or charge a person with a criminal offence.
4.Appoint a Reviewing Liquidator to review the fees of the appointed Liquidator
Creditors can appoint a Reviewing Liquidator by a resolution of Creditors or otherwise by agreement with the Liquidator. The review limited to:
- remuneration approved within the six months before the Reviewing Liquidator is appointed
- costs or expenses incurred during the 12-month period before the Reviewing Liquidator is appointed (unless the Liquidator agrees to a longer period).
If by a resolution of Creditors, the Reviewing Liquidator’s costs are paid by the Liquidation. If by agreement with the Liquidator, the Creditor appointing the Reviewing Liquidator must pay the costs.
5.Remove and Replace a Liquidator
There are a number of ways that Creditors can remove and replace a Liquidator with another Liquidator of their choosing.
Creditors can replace a Liquidator by resolution at a meeting of Creditor or on application to the Court.
6.Lodge a complaint with ASIC or the Court about the Liquidator’s conduct if in breach of their duties
Creditors should first direct any complaints to the Liquidator. If the Liquidator fails to resolve your concerns, which may include concerns about the Liquidator’s own conduct, you can lodge a report of misconduct with ASIC.
Reports of misconduct against companies and their officers can also be made to ASIC.