What is voluntary administration?
Entering into Voluntary Administration might be an opportunity to salvage your business
When a company has a viable business, but is under the pressure of creditors and troubled cash flow, and other worrying financial factors, voluntary administration might be one way of salvaging your operations.
Usually, a voluntary administrator is appointed to temporarily take over the business. the voluntary administrator has all the powers of the directors, and during their time, can run, sell, or stop the business. The main objective of the voluntary administrator is to assess the situation, secure the assets of the business and to provide creditors with viable courses of action to formally restructure the business, the business’ debt or both. A restructure of the business might involve a sale of assets, part of the business or the business as a whole.
The creditors of your company will then have the power to vote on the proposal made to them by the voluntary administrator. there are important voting rules which apply, but the upshot is that the majority of creditors will decide whether a proposed plan should be taken up or whether the company should be put into liquidation or simply returned to the directors.
The advantage of entering voluntary administration is to temporarily halt legal action by creditors against your company. It is also a critical way to avoid or to mitigate any further insolvent trading, and, in doing so, can form part of a director’s defence against insolvent trading in the future. It can also protect directors from ATO actions and director penalty notices. This is also a valuable time to negotiate with creditors. Finally, if the creditors vote for a plan proposed by the voluntary administrator, the company will enter a deed of company arrangement, which effectively settles all existing debts of the company on the agreed terms of the plan.
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Liquidation
When a company is placed into liquidation, this is generally occurs because the company is insolvent and because the company has no realistic chance of resolving its financial distress and becomes necessary to avoid additional financial and legal risks. This is usually because the financial situation of the business is dire and there is no prospect of restructuring or salvaging the business. A liquidation should be a last resort, and there are opportunities to avoid such a consequence. Sometimes, your creditors will have the power to liquidate your company.
Insolvent Trading
if your company incurs a new debt at a time where the company is insolvent, or where it reasonable to suspect that your company is insolvent or could become insolvent because, you and other directors could be engaged in insolvent trading. Learn about what this means and how to avoid this.
Voluntary Administration
Sometimes, risks of insolvency and liquidation might be avoided early via a corporate restructure or voluntary administration. A corporate restructure can involve making changes to the legal and operational set up of your company. For example, this might include changes to ownership, management, leadership, shareholders, operations & policy, employee structures & roles, among other things. Voluntary administration involves the appointment of a voluntary administrator with the view to formally restructuring of or the sale of the business. Learn more.
We have a rich understanding of what works, and, more importantly, what doesn’t
Not all advice in bankruptcy and insolvency is equal, and not all strategies are viable.
When your business or future is on the line, it can be hard to know who you can rely on for help. Cost also plays a part. We know that, sometimes, it can be hard to know who to trust. That is why we are open, clear and straight forward with you when it comes to what works, and what doesn’t work.
Our experience is important because we have a deep understanding of your challenges. We know, and are qualified to give you advice on, how bankruptcy and insolvency laws operate, what strategies actually work and how these can effect your planning. We will work with you to produce a plan which is commercially and legally viable. We do not gamble with your business, or your future.