The Liquidation Process: Part 6: Navigating Claims in a Liquidation

When a company goes into liquidation, creditors face a crucial decision-making period. The liquidation process isn’t just about closing down a company’s operations; it’s also about fairly distributing the company’s remaining assets to those it owes money to. For creditors, understanding how to submit a claim and the hurdles that might come with it is key to safeguarding their interests.

Timing is Everything

First and foremost, timing is critical. Creditors need to ensure that their claims are submitted within the stipulated timeframe—specifically, at least 24 hours before the scheduled creditors' meeting. Missing this deadline could mean your claim is excluded from consideration. However, if you can prove that the delay was beyond your control, there’s a chance the presiding officer might still admit your claim. But why risk it? Meeting deadlines should be a top priority.

The Proof is in the Details

Submitting a claim isn’t as simple as just stating what’s owed. The burden of proof lies squarely on the creditor. Your claim must be backed by solid documentation that shows, at face value, that it’s likely valid. This doesn't require absolute proof—just enough to convince the presiding officer that your claim is legitimate.

Some creditors might attach conditions to their claims, such as a request not to prove the claim if it might result in a contribution. Be cautious with this. The presiding officer might ignore such stipulations and prove the claim anyway if it appears valid. If you’re serious about this condition, make it clear in your communications.

Expect Challenges and Scrutiny

Once your claim is submitted, don’t expect a smooth ride. Defences that the insolvent company raised before liquidation can be brought up again. For instance, if the company disputed the claim due to a breach of contract or argued that the debt was already paid, these issues could resurface.

Creditors—and others with a stake in the liquidation—have the right to inspect claims. They can even question those submitting claims under oath. This process ensures transparency and helps prevent fraudulent or exaggerated claims from slipping through.

The Pitfall of Prescription

Another crucial aspect is the issue of prescription—essentially, the expiration date on your claim. If a debt is too old, the presiding officer might reject it outright unless you can prove that the claim hasn’t expired. The rules around prescription are intricate, depending on the type of debt and how it was incurred, so it’s vital to keep an eye on the clock.

Who Can Submit a Claim?

Any creditor with a valid claim can submit it during the liquidation process. This includes future debts or even claims for damages. However, if your claim arose after the company went into liquidation, you’ll need to pursue other legal avenues, as this process only deals with debts incurred before liquidation.

Liquidated vs. Unliquidated Claims

Not all claims are created equal. Liquidated claims, where the amount owed is clear and undisputed, are straightforward. Unliquidated claims, like those for damages, are trickier. Since their value isn’t immediately clear, they often require further negotiation or court intervention to be admitted.

Interest on Claims

Interest can be a tricky subject. If your debt included an interest agreement, you could claim the interest accrued up to the date of liquidation. However, interest after that date generally isn’t allowed, except in very specific circumstances.

Handling Objections

Even if your claim seems watertight, there’s always a chance of objections. If someone disputes your claim, it’s not the end of the road. The presiding officer might adjourn the meeting to give you a chance to address the issues. In this setting, the goal is to ensure that claims are legitimate without dragging out the process unnecessarily.

Final Thoughts

Navigating the claims process in a liquidation is complex, with many potential pitfalls. But with careful attention to detail and a clear understanding of your rights and obligations, you can position yourself to recover as much as possible. As always, when in doubt, seeking professional legal advice is the best way to protect your interests.