The cars have been removed and the doors are locked on the now empty showrooms and offices.

But if the doors remain closed, and no other actions are taken either by the directors or by a creditor, staff are likely to be left high and dry.

Director of Australian Debt Solvers David Hill explained that any company facing financial difficulties has a number of different routes open to it.

“There’s receivership, administration and liquidation. Both liquidation and administration can be voluntary or involuntary, but receivership is usually initiated by an outside entity – a secured creditor,” Mr Hill said.

In any of these three situations staff can apply to the federal government’s Fair Entitlements Guarantee (FEG) scheme which provides financial assistance to cover certain unpaid employment entitlements to eligible employees who lose their job due to the liquidation or bankruptcy of their employer.

Fair Entitlements Guarantee is a legislative safety net scheme which can allow employees to claim up to 13 weeks unpaid wages, unpaid annual leave and long service leave, payment in lieu of notice and redundancy pay.

However at this stage Eden Motor Group appears to have simply shut up shop.

“If a company has just closed its doors that has a significant impact for employees,” Mr Hill said.

“Even if a company is liquidated staff can contact FEGs but if a director walks away that safety net doesn’t apply and it can be critical for staff,” Mr Hill said.

Receivers are usually appointed by a secured creditor (usually a bank) that holds security over some or all of the company’s assets. In some rare cases, the receiver might be appointed by a court. The receiver’s appointment is usually subject to the terms of a charge, such as a mortgage or a fixed and floating charge over the company’s assets.

The receiver’s key responsibilities are to collect and sell the charged assets in order to repay what’s owed to the secured creditor, and then to pay out the money in the order required by law. Their responsibility is to the secured creditor and not to the other parties who are connected to the company, such as other creditors or unsecured creditors.

One key distinguishing feature of receivership is that a company in receivership continues to exist and directors can remain in office, though their roles are limited. This is quite different to companies in administration or companies facing liquidation.

Another difference is that being in receivership doesn’t necessarily indicate that a company is close to winding up in the near future. In fact, the company may well survive and succeed after the receivership ends. 

A good way to understand administration is to consider it as a point where your company still may be saved. At the administration stage, your company might be close to being insolvent or already insolvent. A resolution of the company directors is typically how an administrator is appointed, but sometimes liquidators, creditors, or a court can appoint an administrator.

The administrator will check the company’s books and inform creditors of their findings, and then make recommendations to creditors. They may report any offences they find to ASIC.

Voluntary administration usually results in two outcomes: entering a deed of company arrangement (DOCA) or liquidation. This is decided by a majority-wins vote at a creditors’ meeting around 26 days after the appointment of the administrator.

Liquidation differs from administration and receivership because once a company is in liquidation, it usually means the company will permanently stop trading and cease to exist. While there are ways back to trading from administration and receivership, liquidation usually means that the liquidator will realise the company’s assets and distribute these among creditors before deregistering the company.

Liquidation can happen when a company is unable to pay all its debts as they become due, or it can happen voluntarily when the company members vote to end the company’s existence. In the case of involuntary liquidation, a court can order the winding up or a creditor might apply for the process to start.

Information provided by Australian Debt Solvers