If you are a trade creditor and you haven’t been living under a rock for the last 6 months, you might have heard talk about the recent Amerind decision coming out of the High Court of Australia.
In Amerind, the High Court decided when a company is insolvent, its employees (via the Government’s Fair Entitlements Guarantee or “FEG”) should receive priority payment over secured creditors out of the company’s circulating assets such as books, debts and inventory (where there is no other property of the company to satisfy FEG). This is regardless of whether the assets are held by the company in its own right or on trust as part of a trading trust.
That might sound confusing, but what it really means is that the High Court has solidified FEG’s “first bite” out of the circulating assets of a company, regardless of how the company chose to operate.
What does this mean for you?
In light of Amerind, it is important for all trade creditors to review their security policies so they are not caught out when a debtor goes belly up. Particularly, it is important that you are aware of strategies which can assist you recover more in the event that FEG gobbles up circulating assets of a company in priority to you.
To assist, we have provided an example of “what to do” to best protect your interests as a trade creditor – from the start of your relationship with a customer through to its hypothetical winding up.
Authors: Peter Mills (former Special Counsel) & Riley McDermott (Associate)