What are my rights if a company I invested in goes bust?

In Plain English

If a company you've invested in goes into winding up (liquidation), you may have certain rights as a creditor or contributory. The court has powers to help ensure fair distribution of assets and can, in some cases, halt or modify the winding up process.

If you acquired a financial product from the company and it contravened certain regulations, you might have the right to return the product and get your money back, even if the company is being wound up.

Detailed Explanation

Your rights as an investor when a company goes into winding up are governed by the Companies Act 1985 (NI) and the Corporations Act 2001.

Staying or Terminating Winding Up:

  • The Court has the power to stay (temporarily halt) or terminate the winding up of a company under section 486 of the Companies Act 1985 (NI) and section 482 of the Corporations Act 2001. This can be done on the application of the liquidator, a creditor, or a contributory (which includes shareholders).
  • The Court may direct the liquidator to provide a report before making such an order.
  • If the winding up is terminated, the Court can give directions for the resumption of management by the company's officers, including holding a general meeting to elect directors.

Delivery of Property to Liquidator:

  • The Court can order a contributory, trustee, receiver, banker, agent, or officer of the company to deliver any money, property, or books belonging to the company to the liquidator, as per section 487 of the Companies Act 1985 (NI) and section 483 of the Corporations Act 2001.
  • The Court can also order a contributory to pay money due from them to the company.

Rights Regarding Financial Products:

  • Under section 1016F of the Corporations Act 2001, if you acquired a financial product in contravention of section 1016E, you have the right to return the product within one month of purchase and get your money back, even if the company is being wound up.
  • If the company (the "responsible person") doesn't repay the money, the directors of the company are personally liable to repay it.

Additional Information Rights:

  • Under section 1017A of the Corporations Act 2001, you may have the right to request further information about a financial product from the responsible person for a Product Disclosure Statement (PDS), if you have been given or should have been given the PDS and are not a current holder of the product. The responsible person must provide the information if it has been made generally available, might reasonably influence a retail client's decision, and it is reasonably practicable to do so.

Important Considerations:

  • The specific actions you can take and the success of those actions will depend on the specific circumstances of the company's winding up and your investment.
  • It is advisable to seek legal advice to understand your specific rights and options.