Will winding up a debtor get you paid?

A winding-up order has not produced cash

A contractor wins an order winding up a customer and expects the invoice to be paid soon afterwards. The customer’s equipment is financed and other suppliers are also owed money. The order may create a formal process for the company’s affairs, but it does not create a fund equal to every unpaid invoice.

Separate the order from a return

Liquidation deals with company assets and claims through the appointed practitioner. Payment depends on what is recovered and how it must be distributed. Avoid promising your own creditors money merely because an order has been made.

Ask the liquidator what reports and claim steps are expected. Treat early recovery estimates as estimates and read the assumptions behind them.

Source: ASIC — Liquidation: creditor guide

Identify your claim position

Gather the contract, invoices, payments and delivery records. Tell your adviser about any security, retained ownership or guarantee rather than submitting everything as an ordinary unsecured account.

Different rights can require different action. Do not assume that a general proof of debt preserves every separate claim or that ownership is established simply because your goods are on the site.

Look at the available pool

Review the liquidator’s information about assets, secured claims, costs and possible recoveries. Distinguish actual realised funds from investigations or claims that may not produce money.

Ask focused questions where information is unclear. A large turnover or impressive premises before failure does not establish assets available to unsecured creditors. Keep expectations tied to evidence.

Manage your own cash response

Write down the likely timing and uncertainty of any return. Prepare a business forecast that does not depend on it arriving soon. Continue lawful recovery options against other liable parties only on appropriate advice.

Use the event to review customer exposure, deposits and credit limits. The practical result is a managed claim and a business plan that can survive the uncertainty, not an assumption that court success equals cash.

Plan around an uncertain recovery

Confirm the liquidation and claim process.

Assess security, ownership and guarantees separately.

Read recovery estimates and their assumptions.

Plan your own cash without relying on an uncertain distribution.

Call CRP today about recovery from a company in liquidation and coordinating a creditor-options review.