A person or company to whom money is owing is a creditor.
There are two main types of creditors. A secured creditor has collateral since their debt is secured on one or more of the company’s assets. For example, a bank may demand that the company’s property is secured against a loan which they provide. Whereas, an unsecured creditor’s debt is not secured on company assets. For example, the company’s stationary supplier will usually not request collateral when supplying goods on credit.
Powers Of A Creditor
Power to seek Court judgements in respect of debts owed - If a company has failed to discharge its debt to a creditor, the creditor can seek a court judgement against the company. The judgement may be enforced by methods such as registration in the High Court and collection by the Sheriff.
Power to seek an investigation of a company - A creditor has the power to apply to the High Court for the appointment of one or more Inspectors to investigate and report on the affairs of a company.
Powers where a default exists - Creditors have the power to serve notice on a company requiring that the company makes good any default in complying with any provision of the Companies Acts. If the company does not rectify the default within 14 days, the creditor can apply to the High Court for an order instructing the company or officer to make good the default.
Power to appoint a receiver - A secured creditor has the power to seek to have a receiver appointed to a company in cases where the company is in default in paying the secured creditor. The secured creditor can either apply to the High Court or utilise the powers contained in the debenture relating to the debt.
Power to seek the appointment of an examiner - In scenarios where a company is not in a winding up process and it appears that the company is unable to or likely to be unable to discharge its debts, a creditor can apply to the High Court for the appointment of an examiner. The Court must be satisfied that there is a reasonable prospect of the survival of the company.
Power to seek the restoration of a company to the Register of Companies - A creditor can apply to the Circuit Court for an order to restore a company to the register in cases where the company was struck off for failure to make an annual return or for failure to make a statement of its particulars to the Revenue Commissioners. In cases where a company was struck off the register due to its not carrying on business, a creditor can apply to the High Court for an order restoring the company to the register.
Powers when a company is not in liquidation - In some cases where a company is not in liquidation creditors can apply to the Court for the exercise of a number of powers which are normally exercised in the context of liquidation pursuant to section 251 of the 1990 Act.
Power To Appoint A Liquidator
A company may be dissolved by a creditors’ voluntary liquidation in cases where the shareholders of the company resolve in general meeting that the company cannot by reason of its liabilities continue its business and that it should be wound up voluntarily. The liquidator is appointed at a shareholders’ meeting. The company should call a meeting of its creditors in which the creditors may consider the statement of affairs, appoint a Committee of Inspection and consider the appointment of the liquidator nominated at the shareholders’ meeting. A majority of creditors can resolve to replace the liquidator that was nominated by the shareholders.
Alternatively, in cases where a company is unable to pay its debts, a creditor may petition the High Court to wind up the company. If the company can establish that there is no liability in respect of the debt, the Court can dismiss the petition.
Choosing The Correct Remedy
It is clear that there are several remedies available to creditors of a company. It is important for creditors to be aware of their rights and to seek professional advice prior to exercising their powers so that the chosen remedy is the most suitable course of action within any given time frame.