Adding your own late payer to the list and checking new clients against the list has long been a feature of our service. But now you can check your clients against the ASIC list of businesses with valid ABN and ACN. Not a valid ACN/ABN? Or – more likely – the number belongs to another company? Beware!
One problem we have all faced is customers who seem to pay, sometimes late, then suddenly they go out of business or into liquidation, almost out of the blue! A new great feature is to check Applications for Wind Up around Australia. On the Wind Up list, other business owners like you have gone to (potentially) great legal expense chasing a debtor. Make sure a new client or some who owes you money is not on the Wind Up List!
What is an Application for Wind Up?
An application for winding up is a legal process whereby a creditor can ask the court to force a debtor company into compulsory liquidation. This means that the company’s assets will be sold off to repay its debts. The Liquidator allocates what they pay the company’s debts, secured creditors first. Often trade and unsecured creditors miss out.
How Does an Application for Wind Up happen?
For a creditor to make an application for winding up, they must first send a Creditors Statutory Demand to the debtor company. A statutory demand is a formal document that requires the debtor company to pay what it owes within 21 days. For companies, the threshold is for debts of $4,000 or more. If the debtor company fails to do so, the creditor can then apply to have the company wound up. If the company doesn’t fight the matter in court, it can be forced into liquidation.
What do you do if a business owing you money is subject to a Wind-Up application?
- You have some time, but often not much, to chase the money.
- Put them on the Late Payer List.
- Considering putting them on cash terms.
- Check your Terms and Conditions – what security do you have?
- Check if the company goes into Liquidation and make a Proof of Debt. Check here.
Understand your risks!
- If you get part or full payment prior to the debtor company going into liquidation, will you risk a preference claim? (What’s a Preference Claim)
- What impact does this have on your own cash flow? Do you need Safe Harbour or Small Business Reconstruction?
- What is the rest of your debt book like? Can you afford another defaulter? (Debt collection)
- Review your terms of trade, security and business terms and conditions.