How To Change a Builder Appointed Liquidator & Why

Fighting for subbies rights

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General Information

Builder Liquidation or Voluntary Administration

When a builder decides to liquidate his company, it's usually for a good reason, one that will only benefit him.

Point of difference is to creditors advantage.

The point of difference with a creditor appointed Liquidator compared to one appointed by the builder is that the creditor appointee does a thorough investigation in the creditors best interests.

Before the builder liquidates, he gets pre insolvency advice, primarily for asset protection. He is advised to move assets out of the company, transfers property and cash to various entities, family and friends. In most cases they will set up a Phoenix company or more than one. They will transfer or novate contracts to the new entity.

He leaves all the debt owed to subbies & suppliers in the company to be liquidated. The result of the liquidation is the debt owed to you is effectively wiped from the face of the planet.

They also transfer the liquidating company's assets into the Phoenix company with no financial recompense. That is a noncommercial transaction.

Voluntary Administration: There is usually only two outcomes, one is a Deed of Company Arrangement (DoCA) or the company is liquidated. Liquidation is usually the way it ends.

Liquidation: refers to winding up the company.  It's the process used to liquidate a company's assets but mainly debts, then the company is closed, or deregistered.

The result: Secured creditors such as the banks are usually paid. The unsecured creditors (subbies & suppliers) rarely see a cent.

• Solvent: A company is "solvent" if it can pay its debts when they are due.
• Insolvent: A company is insolvent if it can't pay its debts when they are due.

How the referral network operates

The referral network is corrupt. It must be because only 7% of liquidators get 51% of the work in the building industry. It's a tight knit circle of pre-insolvency advisors, Liquidators and lawyers. They don't charge less, they keep it tight in their group.

In general terms, a company in trouble will call in a pre-insolvency advisor who will charge a large fee. The advisor will instruct the director on how to protect their assets, hide the funds then when all is ready, for another large fee, they will refer a liquidator who will also charge an upfront fee.

Depending on the size of the job, the up front fee could be $40,000, a relatively small fee for a liquidator but they know they will find more money for themselves through the process. The liquidator has their favourite law firm they work with who will sue creditors for preferential payments. They will also sue the ATO which is an unsecured creditor.

The directors have been trading whilst insolvent which is usually a civil offence and can be a criminal offence in some circumstances but a builder appointed Liquidator may ignore that. On the other hand, the creditor appointed Liquidator will pursue charges through their 6 month report to ASIC. It is then up to ASIC to lay charges. IN some cases, this can lead to more than a suspension of the builder's QBCC license.

If they don't, the Liquidator has other options to have this crime investigated including the Queensland Police and the Australian Federal Police.

• In many cases, the purpose of the liquidation is to rid itself of the debt the company owes to the subcontractors and suppliers who are mostly unsecured creditors.
• In rare cases, a builder can be forced to liquidate if the developer they are working for is insolvent.

In most cases, they will shift assets and register a new company or numerous new companies in family or friends name or they will have an existing "sleeper" company ready to go. It will often have the same builder nominee and registered address. If they have "burnt" the nominee, they will hire a new one.

In the circumstances, this is something that subcontractors would want investigated to find out where their money went.

Illegal phoenix

In many builder Liquidations, sleeper or new ASIC registered entities are often what is known as illegal Phoenix operations. These companies are setup so a liquidating builder can continue to trade, often without missing a beat after leaving creditors with nothing in the liquidation.

Why Change A builder Appointed Liquidator? 

Why not?

You have just read what I said so why wouldn't you change the Liquidator from one appointed by the builder, to one appointed by you the creditor?

If the builder appoints a liquidator and keep in mind that he is now the enemy for not paying you. It's more than likely that the liquidator he appoints will not expend too much time, resources or energy to follow the money trail or the fraudulent accounting to get a positive result for creditors. They want their fee, their hourly rate in the vicinity of $750 and then the windup.

By law, they don't have to act if they don't have the money to do it but SubbiesUnited have a commitment from their preferred liquidators that they will pursue recoveries and insolvent trading claims using professionals on a "no win no fee" basis.

Liquidator funding is also available to Liquidators who are prepared to dig deeper to find the real causes of action against people who have ripped off the unsecured subcontract creditors.

This does not guarantee a return but it goes a long way to making wrong doers accountable. Even if there is no money to collect, the Liquidator may then have evidence that can be reported to ASIC and the Police for further investigation.

It makes sense to change the liquidator

It makes sense therefore, to find a replacement who will best represent the interests of creditors interests rather than the builders. A Liquidator who will follow the money trail, claw it back and return at least some of what he finds to you the Creditor. Sometimes there is genuinely nothing left but if there is, it is traceable.

Step 1 - How to Change the Liquidator

There are two things the liquidator will provide you with:

1. An Appointment of Proxy Vote Form - 532

   A proxy form is required if your business trades as a company or has a registered business name.  If you are a sole proprietor, you won't need a proxy form except if you cannot make it to the meeting.  The proxy form can also be used to nominate another person to represent you or your company if you are too busy to attend the creditors meeting.

2. A Formal Proof of Debt Form - 535 (a form noting the debt you are owed by the liquidating company). You will also have to provide copies of your invoices with this form.

Step 2 - Find a creditor who is willing to hold the proxy votes and proof of debt form for the Creditors meeting. We will always have a creditor to represent you vote to replace the liquidator.

Note: If you have a subcontractors charge registered against the developer, voting with a proof of debt may negate the subbies charge so do not vote.

What Numbers are Required?

50% of the numbers of votes plus 1.

50% of the value of the debt plus $1.

The new liquidators obligation is to make every effort to find some value for subcontractors, the unsecured creditors. That is not always possible but it's your best chance or a return and some justice for the fraud committed against you.

It's time that liquidators lifted the bar in the Queensland building industry and by doing this, we creditors are encouraging them to get their act together.

Please send both forms back to [email protected] urgently if you want to see justice served.

We will check the forms and pass them onto the creditor who has agreed to hold the proxy votes at the meeting.