Receiving notification that one of your debtors has been placed into external administration can be a difficult time for a business. 

A recurring question that arises from creditors in an external administration is how they can ensure their claim has been correctly recorded by the external administrator.

Ordinarily, the external administrator will request that creditors provide details of the debt owing in the form of a Formal Proof of Debt (“POD”) which is the prescribed form that enables a creditor to lodge their claim in the external administration.

Depending on the specific circumstances in the external administration, the external administrator may request that either an ‘Informal POD’ or a ‘Formal POD’ be completed.

Generally speaking, both an ‘Informal’ and ‘Formal’ POD will require the following details from the creditor:

  • The name and contact details of the creditor (it is important that creditors notify the external administrator of any change of address to ensure they continue to receive correspondence about the status of the external administration);
  • The quantum of the debt owing and a description of the nature of the debt (i.e. a loan, supply of goods which remains unpaid, etc); and;
  • Details of any security held (if applicable).

Another common query from creditors is whether their claim is ‘secured’ or ‘unsecured’. To determine whether a debt is ‘secured’ or ‘unsecured’, a creditor will need to consider the following:

  • Whether they have entered into any agreements with the debtor that give rise to a security interest;
  • Whether they have registered that interest on the Personal Property Securities Register (“PPSR”) as against the debtor; and
  • Whether they hold any other forms of security at law (Eg. guarantees, liens, retention of title).

The POD should be accompanied with supporting documentation in order to substantiate the claim (E.g. tax invoices and supplier statements, written agreement/s with the debtor etc).

An external administrator will ordinarily adjudicate on claims received from creditors:

At a meeting of creditors where voting rights need to be determined;

  • When the creditor votes on a proposal without a meeting of creditors;
  • When declaring a dividend; or
  • When requested to do so by the creditor.

During the adjudication process the external administrator will assess the validity of the creditor claims. Where supporting material is not provided, the external administrator may request further information, partially admit or reject the claim.

Creditors should be conscious any deadline for the POD to be submitted as there can be consequences for not providing a validly completed POD by the relevant due date, particularly in the case of declaring a dividend where the creditor may be precluded from participating in same.

If you are experiencing difficulty, need advice about your business’s way out of the Covid-19 crisis, or would like to know more about the help on offer, please contact Andre Nguyen or Shane Cremin on (03) 9670 8700.

Contact our team

Latest News
Changes to Director Penalty Notices go un-noticed
Changes to Director Penalty Notices go un-noticed
Among all of the changes during the past 12 months to the business landscape in Australia, a critical change for Directors’ personal liability may not have been as widely talked about as it otherwis…
Upcoming webinar: How to Lose a President in 10 Days
Upcoming webinar: How to Lose a President in 10 Days
Join us for our next webinar featuring Brent Morgan and Wayne P. Weitz, CTP who will discuss the current situation in the United States surrounding the presidential election, inauguration, impeachment…
Risk Watch Essentials - December 2020
Risk Watch Essentials - December 2020
Covid Analysis The tables and graphs below show that the COVID-19 stimulus measures introduced have had a drastic effect on the number of insolvency and winding up procedures. For the final quarter (…
Tsunami or a series of king waves?
Tsunami or a series of king waves?
I was recently asked why I wasn’t flooded with new work and when I expected it to happen? Like everyone I don’t have a crystal ball but I do have facts upon which to estimate when things will happ…
Chris Bergin - Our newest Registered Liquidator
Chris Bergin - Our newest Registered Liquidator
Rodgers Reidy is pleased to announce a further strengthening of its Registered Liquidator pool with Chris Bergin from our Melbourne office being registered as a liquidator in late 2020. Chris has a re…
Webinar Recording: Return to Work 2021 (the road to recovery)
Webinar Recording: Return to Work 2021 (the road to recovery)
The video below is from our Lunch N Learn session on 16 December 2020 on Return To Work issues, including Employment and the Property outlook for 2021 with panelists Brent Morgan, Neil Salvador, Paul …