Can I still secure compensation from a liquidated business?

Published 02 Jul 2018

Companies come and companies go - it's a fact of business. In fact, nearly 600 enterprises across NSW closed their doors and entered external administration between October and December 2017, according to the Securities and Insurance Commission.

These statistics may be worrying for people considering logging a public liability claim against a business in NSW. What if you suffer a negligence-induced injury which you deserve compensation for, but the business goes into external administration before you make a claim? Read on to find out what actions you need to take to get what you deserve.

What are some of the key terms I should be aware of?

Bankruptcy: This only applies to individuals who operate as sole traders or in a partnership. When declaring bankruptcy, individuals are declared by law as being unable to pay debts. This period lasts for up to three years.

Liquidation: This occurs when a business can't pay its debts. It ceases to operate and company assets are sold until the sum of the debt is paid off.

Deregistering: This means a business owner no longer has to continue their obligations as an officeholder, and is normally done when a company ceases trading.

Can I claim against an individual if the company is liquidated?
Business owners or an on-site manager have an obligation to provide a safe and secure environment for the public under the Civil Liability Act 2002. However, this commitment only runs as far as their professional ties to the business.

This means you cannot sue a negligent individual who was operating in a business capacity at the time of your injury. Public liability extends solely to a professional entity, and as such all compensation claims have to be made against the company itself, not the individual.

What happens if a company deregisters before I file a public liability claim?
Once a business is deregistered, it ceases to exist as a legal entity. As such, any legal claims for compensation made against it would have to end. If you wish to press the case, you would have to convince the court that the company can be reinstated to solvency.

However, luckily a business cannot just deregister when things are going wrong - they have to meet a number of conditions to do so, meaning it's a last resort. This means most business would sooner settle a public liability dispute than opt out as a legal entity entirely.

How do fight for public liability compensation from a liquidated business?
This is a complex area of commercial law that requires the guidance of a legal expert. For help fighting for the public liability compensation you deserve from a negligent business, contact the team at Gerard Malouf & Partners today.