In a liquidation how are distributions to creditors made?

• Generally the order in which funds are distributed are as follows:

• the costs and expenses of the liquidation including the fees of the liquidator; then
• employee wages and superannuation entitlements; then
• other amounts owed to employees for example in relation to:

• annual leave;
• sick leave; and
• long service leave; then

• unsecured creditors.

• Dividends are only paid in relation to debts or claims that have been proved.

• If there are likely to be funds available for distribution the liquidator will ask creditors to lodge formal proof of debt forms.
• The liquidator will also publish a notice in a daily newspaper in those states where the company carried out its business.

• Creditors must lodge their completed proof of debt forms with any relevant invoices or other supporting documents by the specified deadline.

• The liquidator may request additional evidence from a creditor.
• If a creditor provides insufficient evidence of the debt the creditor’s claim may be rejected by the liquidator.

• Within 7 days the liquidator must notify each creditor if their claim is rejected.

• A creditor dissatisfied with the liquidator’s decision should contact the liquidator promptly to seek to resolve the matter.
• If the matter cannot be resolved with the liquidator the creditor can appeal the liquidator’s decision and has 14 days after receiving the notice within which to do so. The court can extend the timeframe to appeal.
• If an appeal is not made within the allowed time the decision made by the liquidator is final.

• Claims which are accepted by the liquidator form a pool of creditor claims to which payments are made from the company’s assets on a pro rata basis.

• While the basic principle of liquidation is that all creditors are to share equally in the assets of the company by way of pro rata payments certain groups are given a priority.
• After all priority payments have been made any remaining funds are distributed to creditors by way of dividends.