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When a company is being wound up, it can be daunting when you’re on the receiving end of liquidator demands but attaining legal advice can mitigate the inevitable pressure. When responding to a letter of demand from a liquidator for the repayment of sums received in the lead up to the winding up of a company it is important to seek legal advice.

liquidator demands: the process

Demands of this nature are not unusual and usually arrive without fanfare 12 to 18 months after a winding up.  Amongst other things, they are premised on a liquidator’s right to recover payments made by the company to a creditor pursuant to a voidable transaction, most commonly a payment that caused an unfair preference.

what is an unfair preference?

An unfair preference occurs if a payment was received by a creditor in the 6 month period leading up to the winding up of a company resulting in that creditor receiving more from the company than it would have received in the winding up otherwise.

Most payments made by the company in the period immediately before winding up would invariably result in a better outcome for a receiving creditor and an unfair preference with the creditor facing the daunting prospect of having to repay the demand for which consideration, in goods or services, had been rendered some time before.

resisting a demand

Pursuing a demand can be costly for a liquidator who must prove that the company was insolvent when the payment was made to the creditor and the payment was an unfair preference. The demand can be resisted on that basis.

The Corporations Act 2001 also afford a defence to a receiving creditor to resist a demand if the creditor received the payment from the company in good faith and without grounds for suspecting the company’s insolvency.

All is therefore not lost when a liquidator comes knocking and a demand, whereas daunting, may not justify surrender in payment.

Our team has extensive experience in assessing liquidator’s demands and advising creditors how to navigate through the daunting experience of a demand, so next time a liquidator comes knocking ask us to answer the call.

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p.s. pay up: navigating the demands of a liquidator

19 October 2022

When a company is being wound up, it can be daunting when you’re on the receiving end of liquidator demands but attaining legal advice can mitigate the inevitable pressure. When responding to a letter of demand from a liquidator for the repayment of sums received in the lead up to the winding up of a company it is important to seek legal advice.

liquidator demands: the process

Demands of this nature are not unusual and usually arrive without fanfare 12 to 18 months after a winding up.  Amongst other things, they are premised on a liquidator’s right to recover payments made by the company to a creditor pursuant to a voidable transaction, most commonly a payment that caused an unfair preference.

what is an unfair preference?

An unfair preference occurs if a payment was received by a creditor in the 6 month period leading up to the winding up of a company resulting in that creditor receiving more from the company than it would have received in the winding up otherwise.

Most payments made by the company in the period immediately before winding up would invariably result in a better outcome for a receiving creditor and an unfair preference with the creditor facing the daunting prospect of having to repay the demand for which consideration, in goods or services, had been rendered some time before.

resisting a demand

Pursuing a demand can be costly for a liquidator who must prove that the company was insolvent when the payment was made to the creditor and the payment was an unfair preference. The demand can be resisted on that basis.

The Corporations Act 2001 also afford a defence to a receiving creditor to resist a demand if the creditor received the payment from the company in good faith and without grounds for suspecting the company’s insolvency.

All is therefore not lost when a liquidator comes knocking and a demand, whereas daunting, may not justify surrender in payment.

Our team has extensive experience in assessing liquidator’s demands and advising creditors how to navigate through the daunting experience of a demand, so next time a liquidator comes knocking ask us to answer the call.