Who’s a creditor?

If a company owes you money, you are a creditor of that company.

An employee is a creditor if owed money for unpaid wages and other entitlements. Creditors owed money if they’ve provided goods or services, or made loans to the company.

A person is also a creditor (contingent) in a certain circumstance — if he or she succeeds in a legal claim against a company.

In general, there are 2 categories of creditor:

• Secured creditor — a person who has a security interest in the company’s assets. It is to secure a debt owed by the company.
• Unsecured creditor — a person who does not have a security interest in the company’s assets.

When lenders provide a loan, they usually require a security interest in company assets. A security interest can take the form of a mortgage or charge.

If a company is insolvent, being a secured or unsecured creditor is important. It’ll determine your priority in receiving payment, as well as your rights and obligations in company affairs.

Voluntary Administration

During voluntary administration, a company tries to improve the way business is run to continue business activity in the long run. Voluntary administration is also to administer company affairs for creditors to receive a more optimal return, if insolvency is inevitable.

The outcome of voluntary administration can either be:

• reinstatement of control of directors;
• closing the company down, and appointment of an individual to liquidate assets; or
• creation of deed of company arrangement — outlining the repayment of debts.

Both secured and unsecured creditor rights are limited during voluntary administration. However, there are 2 meetings where creditors can partake:

1. Creditors can vote on the replacement of the administrator, and the creation of a creditors’ committee.
2. Creditors can vote on the future of the company. The creditor can determine what to pursue among the 3 outcomes after reviewing the voluntary administrator’s reports.

Creditors have to lodge details of their debt and claims directly with the voluntary administrator in order to vote in these meetings.

Receivership

If a company is not able to fulfill its obligations regarding a security interest, a secured creditor has certain rights.

Say, the company can appoint a receiver, whose role is to secure some or all of the company assets to repay the creditor’s debt. Any assets to be sold must be sold at the best price obtainable or the market value.

In receivership, the receiver’s prime obligations are due to the secured creditor.

It also means the receiver is not obliged to report to unsecured creditors, either in writing or in a formal meeting. Although, an unsecured creditor can apply to the court to wind up the company during a receivership.

Liquidation

The winding up of the company is referred to as liquidation. Following voluntary administration or through a shareholder resolution, creditors can decide to go into liquidation. A liquidator takes control of company affairs for all the creditors’ benefit.

Either through a court order or creditors’ decision, both secured and unsecured creditors can initiate this process.

During liquidation, both creditors have the following rights & responsibilities:

Secured creditors:

• vote at creditors’ meetings, and receive dividend payments;
• appoint a receiver to take control of secured assets for debt repayment;
• on their behalf, request the liquidator to deal with the secured assets.

Unsecured creditors:

• lodge debt or claim details with the liquidator, in a Proof of Debt form;
• once the ‘Proof of Debt’ form is approved, vote at a creditors’ meeting;
• approval of liquidator’s fees;
• request the liquidator to recover unfair preferences;
• inform the liquidator about company affairs;
• receive information from the liquidator — through access to reports or a creditors’ meeting;
• enquire about the liquidation process and status;
• receive dividends after repayment of priority creditors; and
• lodge complaints to ASIC, or the court — about the execution of the liquidator’s duties.

Unsecured business loans in Australia

Cigno Business Solutions understands that business is personal and do all they can to be accommodating to all applicants.

Unsecured business loans are great for business owners who:

• need the funds urgently;
• don’t like the idea of offering up security;
• don’t own any assets that can serve as collateral;
• want to do the process online.

With unsecured business loans from CBS, your credit rating isn’t part of the assessment for approval.

What you’ll need to apply are some contact details, a 90-day bank statement for your business, and a registered ABN.

Once your application has been approved, you will receive funds within 2 hours.

Pretty easy, right? Apply now!