Dividends to creditors: How this process works in a liquidation

When a company enters liquidation, the liquidation process is overseen by a liquidator. One of the key responsibilities of the liquidator is to manage the distribution of the company's assets to its creditors. This process is referred to as the "dividend to creditors" and is crucial in ensuring that creditors are paid in accordance with their legal rights and the priorities established under the Corporations Act 2001 ("the Act").

1. Commencement of Liquidation

Liquidation is typically initiated when a company is insolvent and unable to pay its debts. It can be triggered either by a court order or by a voluntary resolution of the company's members. Once the liquidation process begins, the appointed liquidator takes control of the company's affairs, including the identification and realisation of its assets.