It's never easy for a business owner or director when a company runs into financial trouble, but this means it's time to take action. Instead of making any rash decisions, business owners should consider the various processes available to make finding a resolution easier.
This is where voluntary administration comes into play.
A short-term, but effective measure
Choosing to put the company into voluntary administration can sound a lot like admitting defeat, but it's one of the best ways to assess a Company's financial position, understand its financial market and find a resolution suitable to all stakeholders. Under administration, an individual called a voluntary administrator takes control of the business and works with the Directors to put forward a proposal (if possible) to Creditors who ultimately determine the future of the company.
The administration process is a short process that runs for a period of 28 days. During that period, the administrator takes control of the trading of the business, investigates the affairs of the Company and provides a detailed report to creditors outlining the current financial position and options available to the Company and its creditors. Creditors ultimately determine which option the Company takes by voting at a meeting of creditors.
Two of the main objectives of the administration process is to maximise the chance of the business continuing in existence and to obtain the best possible return for creditors.
Of course, administration is not always a clear-cut process. For many, there are a number of important factors to consider prior to putting the company into administration. For one, it's necessary to understand the extent, nature and spread of the liabilities of the business, the attitude of key suppliers and the availability of cash flow.
The experienced professionals at Corporate Lifeline are happy to take your call and explain the details of the administration process and if it is right for your business.
The primary benefits
Opting for voluntary administration has a number of benefits in addition to those noted above, which the Institute of Chartered Accountants in Australia explained. These included:
1) Maximising returns
The administration process aims to maximise the return to creditors by exploring all options available to stakeholders.
2) Ongoing trade
The company can continue to trade and even grow while the administrator assesses the future of the business.
3) A detailed report
Creditors receive a detailed report that the administrator has compiled, outlining the current financial position of the business, what the future is likely to hold and any options available for creditors.
Where can I learn more about the options for my business?
With financial issues causing heartache and stress for many involved in business, it's best to do everything possible to avoid them. If you start to notice financial issues in your company, don't hesitate to reach out to the experienced professionals at Corporate Lifeline. We're here to help and guide you through this difficult time.
