Background Information:

The distribution of remaining funds in any administration activity must be based on priority (refer to section 556 of the Corporations act 2001). Priority is determined by the type of security creditors have over the company being wound up.

We have consolidated all the proceeds from the sale of the Company assets and are preparing to pay a distribution to creditors.

The assets identified in the previous task were sold for the following amounts (net sale proceeds):

• Semi-Trailer Fleet (x6): $1,500,000
• Trailers (x10): $850,000
• Trade debtors: $50,000
• Fuel store (20,000L): $24,000
• Office Fitout: $10,000
• Generators (x3): $4,500
• Coffee machine: $1,500
• Fridge: $300
• Total: $2,440,300

It was identified during the recovery of the assets, that a secured creditor (The Bank Australia) holds a PPSR registration against all 6 prime movers. As a secured creditor, they are entitled to all the proceeds from the sale of these prime movers, up to the value of their outstanding debt. Their debt is $2,000,000.

Unfortunately for The Bank Australia, each prime mover was commercially sold with a consolidated value of $1,500,000, leaving a $500,000 shortfall.

Additionally, in completing the winding up of the transport division, the Administrators have accrued remuneration totalling $150,000.

The subsidiary has no employees so there are no employee claims.

The Administrators have requested that creditors must now submit their final claims and have received the following final claims from unsecured creditors:

• ML Labour Hire: $435,000
• ABC Labour Hire: $150,000
• QLD Roads: $12,000
• RTS Truck Maintenance Services: $90,000
• JB-HI-FI: $4,000
• KTAS: $9,000
• Aus Catering: $1,800
• Director's unsecured loan: $120,000
• Total: $821,800

Question -

In preparing a dividend to unsecured creditors, there are two key considerations in calculating the dividend amount:

1. Administrator's remuneration:The Administrators have remuneration outstanding of $150,000. Administrators remuneration is taken from the pool of funds prior to any secured/unsecured creditors.
2. Secured Creditor:The Bank Australia has received a secured creditor payment totalling $1,500,000. They have a remaining debt of $500,000. The shortfall of $500,000 will become an unsecured claim.

Based on the treatment of the two items above, you will now be required to do calculation to work out the following:

1. The cents per dollar available to unsecured creditors
2. The amount to be paid to each of the unsecured creditors