Melbourne-based Hallbury Homes entered administration in January, with 50 projects on its books, according to The Property Tribune.

While Hallbury Homes is the latest casualty in Australia’s embattled building industry, challenging trading conditions aren’t limited to the construction sector – with nearly 4,000 corporate insolvencies occurring over the 2021-22 financial year, according to ASIC.

That begs the question: what are your rights when a company closes its doors?

The answer to that question depends on whether the insolvent company is put into:

  • Voluntary administration – when the company is placed in the hands of a voluntary administrator tasked with saving the business.
  • Receivership – when a receiver is appointed by a secured creditor to take control of some or all of the company’s assets.
  • Liquidation – when a liquidator is appointed to liquidate a company’s assets and, where possible, fairly distribute them to creditors

In some cases, when a company goes into voluntary administration or receivership, the business will continue trading. In these instances, you might still receive the products or services you have paid for.

What happens if you are owed money?

If you are owed money by a business that becomes insolvent, you’ll join the queue of people waiting to get paid as an unsecured creditor.

The Corporations Act 2001 sets the order in which a trader’s creditors are paid, with secured creditors such as the company’s lender and its major suppliers first in line. Next come priority unsecured creditors, such as the company’s employees. By the time it’s your turn to be paid, there may be no money left, so you may be left out of pocket.

That said, if you paid with a credit card or a debit card, your card provider may be able to reverse the payment. This is known as a chargeback.  You should request a chargeback as soon as possible because time limits apply

Adam Zuchowski is a disputes lawyer and principal at Sutton Laurence King Lawyers.

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