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Coronavirus and the law: My customer has an administrator / liquidator appointed – what should I do?

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The current COVID-19 pandemic is wreaking havoc with businesses
and it is an unfortunate reality that in the event one of your
customers become insolvent, your business could be severely

part three of this series
, Special Counsel Catherine Ballantyne
outlined some practical tips on putting yourself in the best
position available with your customers while solvent. This article
will build on this by examining some steps to take in the event
your customer does become insolvent.

Tips for when an administrator or liquidator is appointed to
your customer

Once an administrator or liquidator is appointed to your
customer there are some important issues to be aware of:

  1. Seek advice to confirm if you are a secured creditor –
    secured creditors enjoy priority over unsecured creditors pursuant
    to the Corporations Act. If you have correctly registered on the
    Personal Properties Securities Register (“PPSR”) this
    will also usually afford you the rights of a secured creditor.

  2. If you are a secured creditor, do not file a proof of debt with
    the administrator or liquidator. In some circumstances, submitting
    a proof of debt and voting in creditors meetings based on this
    proof of debt can be deemed as surrendering your security and
    becoming an unsecured creditor. You need to write separately to the
    liquidator / administrator to make them aware of your

  3. If you are an unsecured creditor, ensure that you submit a
    proof of debt with all of the relevant contracts, terms of trade
    and invoices attached to ensure that you are able to vote at
    creditors’ meeting and receive any dividend payable by the

  4. Stay informed – make sure that your contact details are
    current, read the administrator’s or liquidator’s reports
    carefully, ask questions and attend creditors’ meeting. This
    will assist you in knowing what return you are likely to expect,
    allow you to vote whether to accept any deed of company arrangement
    proposed and be aware of any Court proceedings the liquidator has

  5. Be aware that any payments you have received from your customer
    in the six months prior to the company being placed into
    administration or liquidation could be attacked by a liquidator as
    an unfair preference. If this occurs seek legal advice as to the
    strength of the liquidator’s claim and the best strategy when
    negotiating with the liquidator.


In the unfortunate event that one of your customers has an
administer or liquidator appointed it is important to be aware of
the situation and seek legal advice in order to maximise your

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
Madgwicks is a member
of Meritas, one of the world’s largest law firm

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