Creditors – will I ever get paid?

24 August 2017

As a creditor of a company, it can be quite disheartening to receive notice of the appointment of an Administrator or Liquidator to a debtor company you have been pursuing for payment. Sometimes it confirms what you already knew, and frustration mounts as the effort spent trying to procure payment from the debtor seems futile.  These are all normal reactions, however the voluntary administration or liquidation of the company is actually a positive step in the insolvent company dealing with its liabilities and financial situation.

A common misconception is that the Voluntary Administrator or Liquidator has been appointed to act in the interests of the Directors who initiated the appointment.  In fact, the Administrator or Liquidator is obliged to act in the best interests of the creditors of the company, as mandated by the Corporations Act.

An Administrator or Liquidator seeks to realise or recover any available assets of the company and to distribute such proceeds to creditors of the company.  Often it can take some time for an Administrator or Liquidator to realise a company’s assets, depending on the nature of the assets and the market demand.

Types of Creditors and Order of Payment

A creditor is any entity that is owed money by another entity (debtor).  There are a number of different types of creditors, and the type of creditor you are determines the basis for the order of priority of payment in the winding up of the debtor company, subject to sufficient funds being available.

Creditors fall into the following categories and will be paid in this order, subject to the availability of funds:

  • Secured – being a creditor that has a registered charge or mortgage to secure the debt;
  • Unsecured – which comprises:
  • Priority Unsecured – including employee entitlements;  and
  • Ordinary Unsecured – all other creditors including the Australian Taxation Office.

How do I claim?

The Administrator or Liquidator will notify you if there are sufficient funds for a distribution and will invite you to lodge a formal Proof of Debt form together with supporting documentation to prove your debt.  The Administrator or Liquidator must allow a deadline of at least 14 days.   

 You may request and lodge a Proof of Debt form at any time, even prior to the Administrator or Liquidator advising of a distribution.  It is important to provide as much supporting documentation as possible to avoid your claim being rejected.

When an Administrator or Liquidator has requested a Proof of Debt form as part of the distribution process, he or she will have stipulated a timeframe for lodgement of the Proof of Debt.  Following this, the Administrator or Liquidator will adjudicate on the Proofs of Debt and will notify you within 7 days if your claim has been rejected.  In this case, you will have a further 14 days to appeal the decision prior to the Administrator or Liquidator proceeding with the distribution.

After the Liquidator has adjudicated on all claims, and the relevant time periods have expired the Liquidator will proceed to distribute funds in accordance with the priority of payment stipulated in the Corporations Act and notify creditors accordingly.


If you have any queries in relation to how the insolvency of one of your debtors will affect your business, or require further advice on how to lodge your claim, contact our experienced team at Rodgers Reidy now for a confidential discussion in relation to your specific business circumstances.

Further resources:-

1.       ASIC Information Sheet 74 – Voluntary Administration: A guide for creditors

2.       ASIC Information Sheet 75 – Voluntary Administration: A guide for employees

3.       ASIC Information Sheet 45 – Liquidation: A guide for creditors

4.       ASIC Information Sheet 46 – Liquidation: A guide for employees


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