Customers Subject to an Insolvency Appointment

Your customers should be paying the invoices pursuant to your terms and conditions.

If your customer is placed into any form of insolvency appointment (e.g. voluntary administration, liquidation, bankruptcy, personal insolvency agreement, debt agreement, receivership, etc) you:

1. Will receive a number of reports to creditors.
2. Should consider lodging a Proof of Debt form.
3. Will be invited to participate at meetings of creditors.
4. May be pursued for a voidable transaction (preference, uncommercial transaction, unfair loan etc) by a Liquidator or a Trustee in Bankruptcy.
5. Will be requested to review and approve the remuneration of the insolvency practitioner.
6. Shall monitor the insolvency appointment to identify any potential dividend on your outstanding claim.
7. May wish to inspect books and records of your customer.

Reports to Creditors

During an insolvency appointment, as a creditor you can expect to receive reports to creditors from the insolvency practitioner:

Voluntary Administration – during the period of a voluntary administration a creditor can expect to receive at least three (3) reports to creditors:

First report to creditors – within three (3) business days of the appointment of the Administrator.
Second report to creditors – between ten (10) to twenty (20) business days after the appointment of the Administrator (note: the period is extended by five (5) business days if the appointment is during the Easter or Christmas period).
Third report to creditors – generally issued after the second meeting of creditors advising of the resolution passed by creditors on the future of the company.

Refer to the following link for information relevant to creditors on voluntary administrations:

http://download.asic.gov.au/media/1348514/Voluntary_administration_guide_for_creditors.pdf

Deed of Company Arrangement – a creditor can expect to receive the following reports:

Shortly after the second meeting of creditors providing details of the proposal accepted by creditors and when the signed deed can be inspected
Updates prepared at the discretion of the Deed Administrator on the progress of the satisfaction or default of the terms of the proposal by the company
Should there be any variation to the terms of the Deed of Company Arrangement
Notice calling for Proofs of Debt at the time the Deed Administrator is in a position to declare a dividend to creditors
Distribution of a dividend to creditors
Notification of the completion of the terms of the Deed of company Arrangement

Refer to the following link for information relevant to creditors on deeds of company arrangement:

http://download.asic.gov.au/media/1348514/Voluntary_administration_guide_for_creditors.pdf

Creditors’ Voluntary Liquidation – a creditor can expect to receive the following reports:

An initial notice may be issued within four (4) to eleven (11) days after any appointment of a Liquidator by the shareholders of the company
Updates prepared at the discretion of the Liquidator on the progress of the liquidation and material developments on asset realisations and investigations
Annual update to creditors that may include notice of an annual meeting
Notice calling for Proofs of Debt should sufficient funds be realised and the Liquidator is in a position to declare a dividend to creditors
Distribution of a dividend to creditors, funds permitting
A final report to creditors that may include notice of a final meeting

Refer to the following link for information relevant to creditors on liquidations:

http://download.asic.gov.au/media/1340240/Liquidation_guide_for_creditors.pdf

Court liquidation

There is no statutory period during which a Liquidator appointed by the Court is required to report to creditors. Any such reports are generally issued at the discretion of the Liquidator and usually follow the realisation of fund in the liquidation or a request for funding of any recovery action identified by the Liquidator.

Refer to the following link for information relevant to creditors on liquidations:

http://download.asic.gov.au/media/1340240/Liquidation_guide_for_creditors.pdf

Receiver and Manager

Such an appointment is made for the benefit of the appointing secured creditor or for a specific purpose set out in an Order by a Court. The Receiver and Manager is under no obligation to report to the general body of creditors. A Receiver and Manager may provide an update on any terms for continuing trade.

Refer to the following link for information relevant to creditors on receiverships:

http://download.asic.gov.au/media/2702185/receivership_guide_for_creditors.pdf

Bankruptcy – a creditor can expect to receive the following reports:

If it is a Debtor’s Petition (voluntary bankruptcy) the Australian Financial Security Authority will issue a brief notice of the bankruptcy to creditors disclosed in the Statement of Affairs by the bankrupt
A Trustee in Bankruptcy will issue a detailed report to creditors within twenty-eight (28) days of the receipt of a Statement of Affairs from the bankrupt
If the bankrupt does not file a Statement of Affairs, the Trustee in Bankruptcy will send a report to the known creditors on or about sixty (60) days of the date of bankruptcy
General updates at the discretion of the Trustee in Bankruptcy should there be any material issues or developments or the fee approval is reached
Any proposal submitted by a bankrupt for a Composition or Scheme of Arrangement (Section 73 proposal)
Notice calling for Proofs of Debt should sufficient funds be realised and the Trustee in Bankruptcy is in a position to declare a dividend to creditors
Distribution of a dividend to creditors, funds permitting
A final report to creditors

Refer to the following link for information relevant to creditors on bankruptcies:

https://www.afsa.gov.au/insolvency/i-am-owed-money/person-bankrupt-what-now

Personal Insolvency Agreement – a creditor can expect to receive the following reports:

The Australian Financial Security Authority will issue a brief notice of the bankruptcy to creditors
A Controlling Trustee will generally provide notice of appointment shortly after the execution of the relevant forms
Within approximately four (4) weeks the Controlling Trustee will issue a detailed report that will provide details of the debtor’s proposal, a recommendation and calling a meeting to consider the proposal
An update shortly after the meeting of creditors advising whether or not creditors accepted the proposal
Details of any default or variations of the personal insolvency agreement
Notice calling for Proofs of Debt should sufficient funds be realised and the Trustee is in a position to declare a dividend to creditors
Distribution of a dividend to creditors, funds permitting
A final report to creditors

Refer to the following link for information relevant to creditors on personal insolvency agreements:

https://www.afsa.gov.au/insolvency/i-am-owed-money/ive-received-personal-insolvency-agreement-pia-proposal-what-now

Debt Agreement – a creditor can expect to receive the following reports:

The Australian Financial Security Authority will issue details of the proposal by the debtor
The Australian Financial Security Authority will inform creditors on whether or not the proposal is accepted by creditors
The Debt Agreement Administrator will provide details of any default by the debtor
The Australian Financial Security Authority will issue details of any variation of the proposal for consideration by creditors
Distributions of dividends to creditors by the Debt Agreement Administrator
A final report to creditors

Refer to the following link for information relevant to creditors on debt agreements:

https://www.afsa.gov.au/insolvency/i-am-owed-money/ive-received-debt-agreement-proposal-what-do-i-need-do

Our Services Include:

Summarise in plain English the contents of the reports that are directly relevant to the creditor.
Assessment of the potential result from the insolvency process.
Independent analysis of any proposal to creditors.
Explanation to creditors of their rights.
Assessment of the declaration of independence and relevant relationships.
Communications with the insolvency practitioners on behalf of the creditors.
Assessment of any funding requests by insolvency practitioners, the benefits and risks with funding and options to maximise the return to the creditor.

Proof of Debt

A creditor is entitled to register details of its claim in a formal insolvency appointment.

It is important that any claim is lodged by various deadlines should the creditor wish to participate at any meeting or a dividend to creditors.

A creditor needs to be careful not to release any security interest (e.g. PPSR) that it may hold when submitting a Proof of Debt form.

During an insolvency appointment, you may not be satisfied with the adjudication of your claim for voting or dividend purposes.

Our Services Include:

Confirmation of the relevant dates that a Proof of Debt form should be lodged with an insolvency practitioner.
Assessment of any security or priority claim.
Assistance with the preparation of a Proof of Debt form and the supporting documentation to accompany the form.
Review of and comment on the adjudication by the insolvency practitioner of a Proof of Debt form for voting purposes or dividend purposes.
Assistance to any employee with any claim under the Fair Entitlement Guarantee scheme (FEG).
Assessment of any rejection of a claim of an employee under FEG.

Meetings of Creditors

A creditor with an interest in participating at a meeting of creditors for a customer subject to a formal insolvency appointment will need to lodge a Proof of Debt form and a Proxy form prior to the commencement of the meeting.

A creditor may wish to participate at a meeting for a number of reasons which include:

Obtain information on the status of the insolvency appointment, results of investigations and dividend prospects.
Have an opportunity to ask a director, bankrupt or debtor questions pertaining to the insolvency of the customer.
If a creditor wishes to be on a committee of inspection, the creditor will need to be represented at the meeting of the general body of creditors.
Raising matters that the creditor would like to have investigated.
Being able to vote on any proposal by the company or individual to the creditors.
Replacing the insolvency practitioner.
Voting on the professional fees of the insolvency practitioner.

Our Services Include:

Assistance with the completion of the relevant forms.
Representation at meetings of creditors as your proxy.
Providing you with a summary of the issues that arose at the meeting and further recommendations.

Committee of Inspection

If a creditor wishes to have an active involvement in an insolvency appointment, consideration should be given to being appointed as a member of the committee of inspection.

A committee of inspection assists the insolvency practitioner, approves fees, holds meetings of the committee and may pass resolutions behalf of all the general body of creditors.

Our Services Include:

Informing creditors of the advantages and disadvantages of being a member of a committee of inspection.
Providing guidance and recommendations on matters arising from being a member of the committee of inspection.

Preferential Payment and Other Voidable Transaction Claims (e.g. Preferences and Uncommercial Transactions):

If a company is placed into liquidation or an individual is placed into bankruptcy, the Liquidator or Trustee in Bankruptcy may pursue you for a voidable transaction such as a preference or uncommercial transaction.

To be successful in any legal proceedings against you in respect to a claim the Liquidator or Trustee in Bankruptcy must prove that the company or individual was insolvent during the time of the payment, transfer or other transaction. The Liquidator or Trustee in Bankruptcy would need to prepare a solvency report to substantiate that the company or individual was insolvent at the relevant times.

Determining whether a party is solvent or insolvent is a complex exercise that involves detailed investigations, consideration of relevant common law, the application of the “cash flow test” and consideration of the “balance sheet” test.

The cash flow test requires an examination of all the circumstances relevant to a business to determine if it was able to pay the debts that were due and payable by the due dates. A business is considered to be insolvent if it cannot pay its debts as and when they fall due and payable.

The balance sheet test involves an assessment of the items recorded as assets and liabilities and then a determination of whether liabilities exceed the assets. The business is said to be insolvent if its total liabilities exceed its total assets.

Our Services Include:

We have the expertise to review the solvency report of a Liquidator or Trustee in Bankruptcy to provide:

An independent assessment of the alleged solvency position of the company or individual; and
Expert evidence in Court, if required.

We will explain the result of our findings with you in plain English.

Remuneration of Insolvency Practitioners:

There are different methods that may be used to calculate an Insolvency Practitioner’s remuneration:

Time based / hourly rates – This is the most common method. The total fee charged is based on the hourly rate charged for each person who carried out the work multiplied by the number of hours spent by each person on each of the tasks performed.
Fixed fee – The total fee charged is normally quoted at the commencement of the administration and is the total cost for the administration. Sometimes a practitioner will finalise an administration for a fixed fee.
Percentage – The total fee charged is based on a percentage of a particular variable, such as the gross proceeds of assets realisations.
Contingency – The practitioner’s fee is structured to be contingent on a particular outcome being achieved.

Our Services Include:

Assessment of the method of remuneration chosen by the insolvency practitioner including with the advantages and disadvantages plus the available options
Independent review of the fees of insolvency practitioners.

Monitor Insolvency Appointment for any Dividend to Creditors

There are strict deadlines by which proposals to creditors under a voluntary administration for companies and a personal insolvency agreement and a debt agreement for individuals must be considered by creditors. For such appointments, a creditor needs to be proactive to participate in the determination of whether or not a proposal is accepted.

A liquidation, deed of company arrangement, bankruptcy and receivership may take many years before it’s finalized.

You can engage our services to monitor the insolvency appointment of your debtors to provide you with summaries and recommendations so that you can concentrate on operating your business.

Our Services Include:

We can conduct regular reviews of the status of an insolvency appointment and provide you with brief regular summaries.
Communications with the insolvency practitioner for relevant information.
Monitoring the efficiency of the administration of an insolvency appointment by an insolvency practitioner.

Inspection of Records

You may require access to and inspect various records of a debtor that is subject to an insolvency appointment.

Our Services Include:

Communications with the insolvency practitioner.
Information on the options available to you to obtain access to the records.