WHAT YOU NEED TO KNOW

Creditors meetings in liquidations provide the liquidator with a mechanism to communicate with the creditors of the company in relation to the progress of the liquidation, to seek creditor approval or guidance via creditor resolution on numerous matters, or in some cases are required by law.

In creditors voluntary liquidation a meeting of creditors is required to be convened within 11 days of the appointment of a liquidator being made by the Company’s members. A liquidator may call additional meetings during the liquidation period to provide creditors with an update as to the progress of the liquidation, to seek creditor approval of the liquidator’s remuneration or for any other reason the liquidator reasonably requires (such as to seek creditor guidance or approval of certain matters).
In a court liquidation, the liquidator is not required to call a creditors’ meeting unless a matter requires creditor approval or 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 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 the Australian Securities and Investments Commission (ASIC) within one month of the date of the meeting.

Quorum at a creditors meeting

A quorum at a meeting of creditors is constituted by at least two creditors who are entitled to vote and attendance can be either in person or via proxy. A creditors meeting cannot be validly held without a quorum.
If a quorum is not present at a creditors meeting within 30 minutes after the time set for the meeting, the meeting is automatically adjourned to the same day in the next week at the same time and place or to a day appointed by the chairperson (subject to notice requirements).

Voting at a creditors’ meeting

To be entitled to vote at creditors’ meeting, a creditor must lodge details of their debt or claim with the liquidator. Creditors will be provided with a Proof of Debt Form to be completed and returned before the meeting. Creditors may appoint a proxy to attend and vote at a meeting on their behalf. The proxy may vote generally or as specifically instructed by the creditor.
Voting on resolution at a creditors meeting will be initially taken on the voices (creditor’s voice in favour or against). However, a creditor holding more that 10% in value of all votes may request a poll to be taken. A poll is a written ballot of voting. A resolution will be passed if a majority of number and value vote in favour of the resolution.
If there is a deadlock in the voting, the chairperson is entitled to exercise a casting vote. In exercising the casting vote, the chairperson must detail the reason why he or she voted in a particular way.

Committee of inspection

In both types of liquidation, the liquidator may ask creditors if they wish to appoint a committee of inspection and, if so, who will represent the creditors on the committee. A committee of inspection assists the liquidator approves fees and, in limited circumstances, approves the use of some of the liquidator’s powers, on behalf of all the creditors. Committee meetings can be arranged at short notice, which allows the liquidator to quickly obtain the committee’s views on urgent matters. Shareholders may also be members of the committee. A committee of inspection acts by a majority in the number of its members present at a meeting, but it can only act if a majority of its members attend.
A liquidator must consider any directions given by the committee of inspection but is not bound to follow them. Minutes of a committee of inspection meetings must be prepared and lodged with ASIC within one month of the date of the meeting.

For more information on corporate insolvency review the resources below or contact us today.

CORPORATE INSOLVENCY KNOWLEDGE & ARTICLES

DEBT RECOVERY
If a creditor is owed money by a company, there are many ways they can seek to recover it. Directors and companies should be aware of their rights and obligations in the event that debt collection processes are in full swing and the company is exposed to legal action and enforcement.

CREDITORS
Taking an interest in the liquidation of a company that owes you money may help you to secure a better financial return. Whether you’re an employee who is owed wages or a supplier seeking payment, here is an overview of the rights and obligations of creditors in insolvency.

CORPORATE INSOLVENCY: AN OVERVIEW
A formal insolvency commences when a company is unable to pay its debts, prompting the appointment of an external administrator. Understanding the overall insolvency framework can assist you to lessen any financial and emotional impact as you move through the complex insolvency processes. The three most common types of formal insolvency appointments are Voluntary Administration, Liquidation and Receivership.

DIRECTOR PENALTY NOTICE AND ENFORCEMENT
One of the most powerful tools wielded by the Australian Taxation Office is the ability to issue a Director Penalty Notice (DPN) against company directors for certain company debts including PAYGW and SGC. Serious implications flow from non-compliance with the ATO’s requirements it pays to be informed, upfront, lodge company statements on time and to maintain good order in the books.

EMPLOYEE ENTITLEMENTS SAFETY NET
When a Director is contemplating putting their company into liquidation, one of their biggest fears is that their loyal and hardworking staff won’t be paid their entitlements. Fortunately there is a government safety net that protects employee entitlements in these situations.

INSOLVENT TRADING
Insolvent trading occurs when a company is unable to pay its debts and continues to incur further debt. When a company is experiencing a cash flow or liquidity crisis, it is important that its directors and officers consider the company’s ability to pay all of its debts as and when they become due.

LIQUIDATORS’ RECOVERY ACTION
The Corporations Act 2001 (Cth) (Act) permits liquidators to recover certain transactions made within a set period before the commencement of a company’s liquidation. These transactions are known as “voidable transactions”.

CORPORATE TURNAROUND
Get a broad overview of the major steps in turnaround strategy. One of the major drivers for business insolvency is failure to challenge business models and take strategic action early. When businesses started to find themselves in a tight financial position it is vital that an appropriate turnaround strategy is implemented quickly.

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