A proposed liquidator is not your private debt collector

Starting the application does not buy control

The builder has not responded to your statutory demand and you are discussing winding-up proceedings with a lawyer. A proposed liquidator may also be identified. Before committing to the process, understand the different roles. Your lawyer can advise on your claim and application, while a liquidator's eventual duties are not simply to collect your invoice on your instructions.

Separate the engagements

Imagine a creditor paying legal costs and speaking with an insolvency practitioner about a possible appointment. Record who is engaged for which work and what any proposed payment covers. Ask about the practitioner's role, required disclosures and independence questions. Do not assume that arranging an introduction gives you authority to decide which assets are sold or which creditor is paid first.

Read the creditor guidance

ASIC explains that a liquidator collects and sells company assets, investigates affairs and distributes available funds according to the relevant order of payment. That role concerns the liquidation as a whole. Ask your lawyer what it means for your recovery decision. An appointment should not be presented to your accounts team as a guaranteed collection service for your individual debt.

Source: ASIC: Liquidation, a guide for creditors

Provide useful information without directing the outcome

You may hold evidence about assets, transactions or disputed balances. Give it through the appropriate channel with the source and uncertainty identified. In the creditor's example, a report that equipment was moved should be supported by dates and observations. Do not demand a particular allegation or recovery action as the price of cooperating with the liquidator.

Understand what updates can establish

Ask how creditors will receive information and how specific questions should be raised. Distinguish a practitioner considering evidence from a concluded finding or promised recovery. If further funding is discussed, obtain advice on the actual proposal and your position. Keep that decision separate from any expectation that your original application costs purchased priority over everyone else.

Make an informed winding-up decision

Confirm the legal requirements, costs and commercial risks with your lawyer before proceeding. Record the realistic purpose of the application and what remains uncertain. Understanding the liquidator's role helps prevent a second dispute after appointment, when the creditor discovers that initiating the process does not mean controlling the company's remaining assets or the distribution of money.