Friday, 1 April 2022

What to do when your customer goes bust!

While it would be great if lodging a registration on the PPSR actually stopped your customer from going insolvent, that’s probably a little too much to expect from a $6 registration.  However, your registration will give you an important leg up in trying to recover something from the inevitable mess caused by the insolvency – specifically, any money you are owed for unpaid for goods.

Your first action (after putting a hold on any future deliveries) should be to write to the insolvency practitioner.  If you haven’t already got it, you can find contact information for the liquidators via ASIC .  Although you can write a letter, it is probably best if you use email.

Your email needs to put the liquidator on notice that you are owed money and that you want your recovery rights to be respected.  You will also want to start the process of gathering information to ensure any value you are able to recover is maximised.

You will, therefore, need to include:

·         A statement of account showing what is owed and/or outstanding.

·         A listing/description of what goods have been supplied (including any information that might help the liquidator identify the goods on a factory/warehouse floor).

·         A copy of your Terms & Conditions clearly showing your security rights (usually a Retention of Title clause) and some indication that the insolvent company actually accepted those terms – most commonly a copy of the Credit Application completed by the company.

·         A copy of your PPSR registration (the Verification Statement) – the registration number would probably be sufficient as the liquidator will, as a matter of course, obtain details of all the registrations lodged against the insolvent company.

·         A request for an urgent stocktake of your goods held at the insolvent company’s premises (or anywhere else where they may be being held on the company’s behalf).

·         A request for access to the company’s premises to identify any goods you have supplied. And

·         A demand that the liquidator ensure that any sales of your goods be put on hold and not go ahead without your express consent in writing.

It is important to remember that, even though you may not want your goods back – perhaps they have been specially made or adapted for this one customer – you still need to assert your right to recover them so as to maintain leverage over a liquidator who may well want to sell them as part of an end product to maximise income from the company’s assets. Unless you wash your hands of them, the liquidator will need your permission to deal with those goods and therein lies the opportunity for a deal to be made.

Have you sold tyres to a trucking company?  Getting used tyres back may not be a particularly attractive idea for you, but a liquidator will have a much better chance of making a profitable sale of vehicles with tyres than without.  If the liquidator wants to sell trucks with your tyres on them, your registration gives you the opportunity to insist that the liquidator pays you what you are owed out of the sale proceeds.

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