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Can an unsecured creditor sue a company?
16-Jan-2023 (In Corporate Law)
A company in which all the shares are held by family members faced loss in the market and had to be liquidated. At the time of liquidation it was found that the family head who held major shares was a secured debenture holder against the assets of the firm. He took over the assets leaving the unsecured creditors with nothing. Can the creditors sue the company as the shares were held by the family members of the head of the family?
Yes, ofcourse. it seems to be a pre planned act by the said shareholder. The Company can be sued by the creditors.
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Adv. Avneesh Garg
Delhi | 200+ Answers
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Legality of the transactions process and documents need to be looked into to answer the question. Still, on prima facie, creditors can sue the Company etc. Here, it needs to be noted that if these kinds of transactions would be allowed to be carried by any Company whether the shares are held by the Company or a group of shareholders, then unsecured creditors may be trapped very easily. Lifting of veil is well known legal notion to help the bonafide creditors even if, their debts are unsecured.
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Adv. Shankar Kumar Jha
Delhi | 25+ Answers
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As an unsecured creditor you have several options available. Amongst the options you can proceed with filing for winding up of the company. While unsecured creditors are given relief only after the secured creditors are satisfied but it is a good leveraging remedy where you can seek payment of your dues. If you want to explore other options too then please contact me with the documents that you have
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Adv. Shikhar Khare
Delhi | 100+ Answers
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