Get paid before it's too late
No one likes not getting paid. That’s a fact.
Unfortunately, being involved in a business deal can often mean that you miss out on being paid as a result of poor business conduct or the inability to pay due to a lack of cash flow.
With all things, it’s best to get paid before it’s too late, as this inconvenient delay in payment may lead to the inability to receive money completely as a result of the business going into administration or liquidation.
When a company enters liquidation or administration, the most stressful question for creditors and liquidators is who gets paid first? And whether you’re even getting paid at all.
But what is the difference between administration and liquidation? And how does it apply to you as a creditor?
Of course, you could use a platform like DebtForce, a digital debt collection agency, to manage your debt collection process before an administration takes place to avoid not being paid at all. But if you’re unlucky and get caught out, read on to find the process of getting paid when a business goes into administration or liquidation.
Administration
An administration can be initiated by either the directors or creditors of a company, whereby the company is identified as being insolvent or is about to become insolvent and is unable to pay its debts.
Voluntary administration is where a company is experiencing solvency issues and temporarily stops trading to prevent any further debt. Voluntary administration does not cancel the company’s existing debts, however, it does stop creditors and other stakeholders from taking any legal action against the company until the administrator decides on how to proceed.
Existing legal proceedings stand still at this point and the administrator is put in charge of inspecting company books and speaking with creditors before recommending a course of action to the company.
As a creditor to a company that has gone into administration, notice will be given that an administrator has been appointed and a meeting of creditors will be held within 8 days of appointment.
The administrator will then prepare a report that sets out the financial position of the company and within 20 days of appointment, another meeting takes place and creditors are able to vote on the future of the company. This vote may include the following options on whether company will:
- Enter into a deed of company arrangement on how the company’s debt should be handled;
- Enter into liquidation (where the administrator is unable to save the company and it must be wound up); or
- Return it to the directors where the company can continuing trading despite its current position of debt
When a company is returned to the directors, it is a positive outcome for secured and unsecured creditors as it will mean that the company will eventually pay its debts and is in the position to eventually do so.
So, there is some light at the end of the tunnel but it also begs the question as to when will you get paid? Unfortunately, as the whole process takes time for the company to get back on its feet, there remains a huge level of uncertainty as to when pay day will come for you.
Liquidation
Often following the administration process, liquidation is initiated by either the creditors via a court order or the shareholders of the company by resolution.
This involves winding up the company’s operations and appointing a liquidator who will stop business operations, take control of all company assets and convert them into cash, distribute the proceeds from the sale of assets between the company creditors and pay any remaining cash to its shareholders.
As a creditor to the company, when you’ll get paid depends on your priority and the liquidator will pay a company’s debts according to this order:
- Costs and expense of the liquidation process
- Outstanding employee wages and super
- Outstanding employee benefits
- Unsecured creditors
As a creditor, you will have very limited say over the liquidation process unlike in administration. There will be no opportunity for negotiating flexible payment arrangements and the company must stop trading operations completely. In most cases, creditors often receive only some or none of the money the company owes.
There is also an order of payments to creditors, which depends on whether you are secured or unsecured. Secured creditors are those who hold a security over the company's assets (holding a mortgage over the company or has a registered security interest). Next, there are priority unsecured creditors who are often employees. Finally, remaining payment is made to unsecured creditors including customers, contractors and suppliers.
So what should you do to get paid before it’s too late?
Going after payments can be an annoying process, but what’s more annoying is when a company is headed for administration and you haven’t been paid yet. Not only does this mean uncertainty as to when you’ll get paid, but also the risk of not being paid at all and losing out completely.
Given the economic climate, you shouldn’t take the risk of waiting around to get paid. Lodge those handful of aged debts with DebtForce and take control of your payment process before it’s too late.
Unlike the majority of debt collection agencies in Australia, DebtForce is unique in its ability to give you a hands-on experience of following the debt collection process from start to finish. There’s real time updates about the progress of your claim, with the control over what’s happening as opposed to leaving it up in the hands of third party debt collectors. DebtForce offers flexible payment options for debtors to meet realistic payment schedules that work for everyone.
It’s time to get paid before it’s too late.
Claim your debts now with DebtForce.