Creditor Rights in Liquidation: What You Are Legally Entitled to Do When a Queensland Company Collapses

When a company enters liquidation, creditors have enforceable legal rights — and our Brisbane insolvency lawyers can help you exercise them under the Corporations Act 2001 (Cth), the right to lodge a proof of debt, attend and vote at creditors’ meetings, request the liquidator investigate suspicious transactions, and apply to have a reviewing liquidator appointed if the process is mishandled. Most creditors do not use these rights — but our debt recovery lawyers in Brisbane can help you navigate the process effectively. This guide explains what they are and how to exercise them in Queensland.

What Happens to Your Debt When a Company Goes Into Liquidation

A company enters liquidation in one of two ways: by court order under Part 5.4B of the Corporations Act (a court-ordered winding up), or by a resolution of its creditors following voluntary administration (a creditors’ voluntary liquidation under Part 5.5).

The moment a liquidator is appointed, the legal landscape changes entirely for every creditor who is owed money. Under s 471A, the company’s directors lose the power to deal with the company’s property. Under s 471B, creditors cannot commence or continue legal proceedings against the company without the leave of the court.

That means your unpaid invoice, your judgment debt, your breach of contract claim, all of it is frozen. The path to recovery is through the liquidation process, not through the courts.

There is one important exception. If a creditor has already obtained a judgment and wants to enforce it by garnishee order or writ of execution, this also requires leave under s 471B. Many creditors discover this too late, after attempting to enforce a judgment only to find the company has entered liquidation the day before.

Your Right to Lodge a Proof of Debt

The primary mechanism for creditors to participate in a liquidation is the proof of debt. Under Schedule 8A of the Corporations Regulations 2001, creditors must complete Form 535 and lodge it with the liquidator to have their claim admitted.

The proof of debt must include:

• The nature of the debt (unpaid invoice, loan, judgment, damages)
• The amount claimed, including any interest
• Supporting documents (invoices, contracts, statements of account, judgments)
• Whether any security is held over the debt

There is no statutory deadline for lodging a proof of debt, but there are practical deadlines. To vote at the first creditors’ meeting, the proof must be lodged at least 2 business days before the meeting. To participate in a dividend distribution, it must be lodged before the liquidator sets the distribution date.

If the liquidator rejects your proof of debt, entirely or in part, you have the right to appeal to the court under s 1321 of the Corporations Act. The court will assess the proof on the merits. Creditors who hold security over company assets are treated differently: their security is first applied to the debt, and only the shortfall is an unsecured claim in the liquidation.

Your Rights at Creditors’ Meetings

Liquidations involve at least one formal creditors’ meeting, though there may be several. In a creditors’ voluntary liquidation, the first meeting is typically held within 11 business days of the liquidator’s appointment. In a court-ordered winding up, the liquidator must convene a meeting if required by creditors under s 473(2).

At creditors’ meetings, creditors who have lodged proofs of debt can:

• Vote on key resolutions. Resolutions at creditors’ meetings are passed by a dual majority, a majority in number AND a majority in value of creditors voting. Under r 75.65 of the Insolvency Practice Rules (Corporations) 2016, the chair may cast a deliberate vote to pass or defeat a resolution in a deadlock situation.
• Approve or reject the liquidator’s remuneration. The liquidator’s fees must be approved by creditors or the court. Under s 473C, creditors can pass a resolution fixing the remuneration basis. If creditors disagree with the approved remuneration, they can apply to the court for a review.
• Appoint a Committee of Inspection. A Committee of Inspection is a small group of creditors (typically 3 to 5) with authority to review the liquidator’s actions and approve certain steps. Committees are most useful in complex liquidations where creditors want ongoing oversight.
• Replace the liquidator. Under s 473A, creditors can pass a resolution to appoint a different liquidator. This requires the ASIC or court process but gives creditors real leverage if they have concerns about independence or performance.

The Priority Waterfall: Where Unsecured Creditors Stand

The single most important concept for unsecured creditors to understand is the priority order under s 556 of the Corporations Act. Before any unsecured creditor receives a cent, the following claims must be paid in full:

1. Secured creditors. Banks and financiers with registered security interests (mortgages, floating charges) are paid from the proceeds of the assets they hold security over. They sit outside the s 556 waterfall entirely.
2. Liquidator’s costs and expenses. The cost of the liquidation itself, including the liquidator’s fees, legal costs, and administration expenses, is the first call on unsecured assets.
3. Employee entitlements. Outstanding wages (up to 13 weeks), leave entitlements, retrenchment pay, and superannuation contributions owed at the date of liquidation are priority creditors under s 556. The Fair Entitlements Guarantee (FEG) scheme may advance these amounts if assets are insufficient, but FEG then takes over the employee’s priority claim.
4. Unsecured creditors. All remaining creditors, trade suppliers, landlords, customers who paid deposits, tax creditors, share pro-rata in whatever is left.

In practice, most liquidations return nothing to unsecured creditors. ASIC’s data consistently shows that the majority of creditors’ voluntary liquidations result in no dividend. This is not a failure of the process, it is the commercial reality of insolvency. The value is gone before the liquidation is triggered.

Understanding this early changes how a creditor should approach the process. The goal for most unsecured creditors is not recovery, it is intelligence: identifying whether the company’s officers behaved improperly, whether related-party payments can be clawed back, and whether the directors can be pursued personally.

Voidable Transactions: The Most Overlooked Creditor Right

The liquidator has power to investigate and recover certain transactions made by the company before it entered liquidation. These are called voidable transactions under Part 5.7B of the Corporations Act. The most commonly recovered transaction type is the unfair preference.

Under s 588FA, a transaction is an unfair preference if it was made between the company and a creditor when the company was insolvent, the creditor received more than they would have received in the liquidation, and the transaction occurred within the 6-month period before the relation-back day (or 4 years for related parties under s 588FE(4)).

This matters for two reasons. First, creditors who received payments from the company in the lead-up to its collapse may face a demand from the liquidator to repay those amounts. Second, creditors who did NOT receive preferential treatment can request the liquidator investigate suspicious payments to other parties.

The good faith defence under s 588FG(2) protects recipients who received the payment in good faith, had no reasonable grounds to suspect insolvency, and provided valuable consideration. This defence is fact-specific and often contested.

Beyond unfair preferences, the liquidator can investigate:

• Uncommercial transactions (s 588FB): asset sales at undervalue, excessive management fees to related entities
• Unfair loans (s 588FD): loans on terms that were grossly unfair when made
• Creditor-defeating dispositions (s 588FDB): transfers designed to prevent creditors from accessing company assets, introduced by the Treasury Laws Amendment (Combating Illegal Phoenixing) Act 2020

Creditors who have information about pre-insolvency transactions, payments to directors, unusual asset transfers, related-party deals, should provide this information to the liquidator in writing, early. The liquidator cannot investigate what they don’t know about.

Investigating Director Conduct

Under s 533 of the Corporations Act, if a liquidator suspects that an officer of the company has committed an offence in relation to the company, they must report this to ASIC. Creditors cannot compel a criminal referral, but they can provide information and request that the liquidator take action.

Where director personal liability exists, insolvent trading under s 588G, director penalty notices for unremitted PAYG and superannuation, or personal guarantees, creditors may have a direct claim against the director independently of the liquidation. These claims do not go through the proof of debt process. They are separate causes of action that must be pursued directly, and they are not stayed by the liquidation moratorium under s 471B (which applies to the company only).

Applying for a Reviewing Liquidator

If creditors believe the liquidator is not performing their duties properly, failing to investigate, failing to recover obvious voidable transactions, approving excessive remuneration, or operating under a conflict of interest, creditors can apply to ASIC to appoint a reviewing liquidator.

This power exists under Division 90 of Schedule 2 to the Corporations Act (the Insolvency Practice Schedule). ASIC’s process is set out in Information Sheet INFO 296 (June 2026). Any creditor with a financial interest in the liquidation can apply.

ASIC considers whether the application raises a genuine concern, whether the liquidation has the assets to fund the review, and whether the applicant has attempted to resolve the issue with the liquidator first. ASIC is more likely to appoint a reviewing liquidator where:

• The liquidator has failed to investigate creditor reports of related-party transactions
• The liquidator’s remuneration appears disproportionate to the work done
• There is an undisclosed conflict of interest (e.g., the liquidator’s firm had a prior relationship with the company’s directors)
• The liquidator has made a significant error in assessing proofs of debt

Practical Steps for Queensland Creditors

When you receive a notice of liquidation, these are the steps that protect your position:

1. Register your interest immediately. Email the liquidator confirming your claim before the first creditors’ meeting. This puts you on the creditors list and ensures you receive all subsequent correspondence.
2. Complete and lodge Form 535. Do not wait for an invitation. Download the form from ASIC’s website, attach every supporting document, and lodge it with the liquidator at least 2 business days before any meeting you want to vote at.
3. Attend the first creditors’ meeting. This is where the liquidator reports on the company’s affairs, the RATA (Report as to Affairs) is tabled, and key decisions are made. Creditors who do not attend have no say.
4. Review the DIRRI. The Declaration of Independence, Relevant Relationships and Indemnities (DIRRI) discloses the liquidator’s conflicts of interest. If you identify a conflict that has not been disclosed, raise it immediately and in writing.
5. Provide information about suspicious transactions. If you are aware of unusual payments, asset transfers, or related-party dealings in the 6 to 24 months before liquidation, tell the liquidator. Set it out in writing, with dates and amounts.
6. Get advice on director liability. Assess whether the company’s directors may be personally liable for insolvent trading or unpaid DPNs. These are independent claims that operate outside the liquidation.

When to Get Legal Advice

Creditors in Queensland liquidations benefit most from early legal advice in four situations. First, where the amount owed is substantial and active participation in the liquidation is worth the cost. Second, where you have received a demand from a liquidator alleging you received an unfair preference. Third, where you suspect director misconduct and want to ensure the liquidator is adequately investigating. Fourth, where you are a secured creditor and need to enforce your security interest while navigating the s 471B moratorium.

Boss Lawyers acts for creditors in Queensland liquidations and insolvency administrations. For advice on your rights as a creditor, contact Mark Harley at bosslawyers.com.au/service/insolvency-lawyers-brisbane/ or call 1300 267 711.

Frequently Asked Questions

Can I still sue the company after it goes into liquidation?

No. Once a winding up order is made under s 467 of the Corporations Act, s 471B prevents creditors from commencing or continuing legal proceedings against the company without leave of the court. Your remedy is to lodge a proof of debt with the liquidator under Schedule 8A of the Corporations Regulations 2001.

What is the order of priority for creditors in a liquidation?

Under s 556 of the Corporations Act, the priority order is: (1) secured creditors (paid from their security); (2) liquidator’s costs and expenses; (3) employee entitlements (wages up to 13 weeks, leave, superannuation); (4) unsecured creditors pro-rata. In most liquidations, unsecured creditors receive little or nothing because the assets are exhausted by the time the waterfall reaches them.

How do I find out if the company paid someone before going into liquidation?

Request a copy of the Report as to Affairs (RATA) tabled at the first creditors’ meeting. The RATA requires the company’s officers to disclose assets, liabilities, and creditors. You can also ask the liquidator in writing whether they are investigating voidable transactions under Part 5.7B of the Corporations Act, and request updates on any recovery proceedings.

Can I pursue the director personally for the company’s debt?

In some circumstances, yes. Directors may be personally liable for insolvent trading under s 588G of the Corporations Act (if the company incurred debts while insolvent), for unpaid PAYG withholding and superannuation via the Director Penalty Notice regime (Part 4-15 of Schedule 1 to the Taxation Administration Act 1953), or under a personal guarantee if one was given. These are independent claims against the director, separate from the liquidation.

What can I do if I think the liquidator is not doing their job properly?

Creditors can apply to ASIC to appoint a reviewing liquidator under Division 90 of Schedule 2 to the Corporations Act. ASIC’s process is described in Information Sheet INFO 296 (June 2026). ASIC assesses whether the concern is genuine and whether the liquidation has sufficient assets to fund the review. You should also raise concerns in writing with the liquidator directly before applying to ASIC.

This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.