Other than demanding payment of monies owed, creditors are often reluctant to engage proactively with financially distressed customers and forego rights to recover assets or affect recoveries through alternative legal mechanisms.
It is often due to:
- the confrontational nature of negotiations arising from a corporate collapse, which can be uncomfortable for individuals dealing with long-term industry relationships
- reluctance of insured creditors to expend time and effort pursuing opportunities to mitigate their credit exposure when the vast majority of the loss is borne by their insurer.
In recent years, a number of legislative changes have expanded creditors’ rights to recover directly from key counterparties to failed and failing businesses. For example:
- The Personal Property Security Act (PPSA) allows Retention of Title suppliers to not only recover (and resell) unused stock, but to trace through the production cycle to inventory, debtors and ultimately cash .
- State Industry Building and Construction legislation provide subcontractor charge and payment withholding regimes to assist ‘leap-frogging’ an insolvent debtors and recovering directly from developers and, in certain cases, their financiers.
Creditors often forfeit significant value where PPSA, subcontractor charges and other recovery opportunities – like equitable charges against the insolvent or its guarantor – are not promptly explored and proactively managed.
How we help
Our team can help clients to recapture this otherwise lost value. In addition, we can assist clients with:
- managing collections from distressed customers while minimising the risk of claw-back by liquidators
- understanding rights when customers enter external administration
- liaising with liquidators of insolvent customers to actively manage the recovery of assets (under PPSA) and influence strategy the administrators' strategy
- defence of Liquidator Voidable Transaction claims
- enhancing credit risk score – we regularly interact with banks, credit bureaus and insurers
- undertaking counterparty risk assessments (particularly for larger contracts).
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