Voluntary Administration
How did we get here?
- The company is insolvent and unable to repay debts. The directors may be guilty of trading while insolvent if the company continues.
- The company has severe financial difficulties and is under pressure from creditors.
- There are disputes between directors/other shareholders.
What’s next?
- An Administrator is appointed to take full control of the company.
- The Administrator will
– Continue to run the company
– Investigate the financial affairs of the company
– Identify and assess the value of company assets
The Outcome
- The Administrator will present three options for a vote by company creditors:
– Put the company into liquidation
– Approve a deed of Company Arrangement (DOCA)
– Return the company to the control of the directors
Liquidation
How did we get here?
- The company is deemed insolvent and is no longer viable as a business.
- Company shareholders have triggered liquidation
- Company creditors voted for the company to be put into liquidation after the company entered voluntary administration
- A company creditor took the company to court with a wind-up application
What’s next?
- A liquidator is appointed. Responsibilities include:
– Identify company property and other assets
– Sell assets to raise funds
– Investigate the company and directors to establish why the company failed.
– Ensure no offences were committed
– Report to creditors and to the Australian Securities and Investments Commission (ASIC)
The Outcome
- Proceeds from the sale of company assets are used to:
Cover the costs of liquidation - The remaining funds, if any, are used to repay company creditors
Bankruptcy
How did we get here?
- An individual may be unable to repay debts or agree on a repayment plan with creditors. They can choose to make themselves bankrupt
- A creditor may have unpaid debts. They may be concerned over the financial dealings of a debtor and they may apply to make the individual bankrupt
What’s next?
- A trustee is appointed. Their role includes
– Investigating the financial affairs of the bankrupt
– Identify and sell ‘divisable’ assets, such as property, shares, cash and vehicles
– Report any offences to The Australian Financial Security Authority (AFSA)
– Report to creditors
– If sufficient funds are recovered, pay a dividend to creditors
The Outcome
- The bankrupt is free from most debts
- Creditors may no longer pursue the bankrupt individual for repayment
Section 73 proposal
How did we get here?
- A bankrupt person comes to an arrangement with their creditors
- The offer may include assets that weren’t previously available, such as funds from a third party
What’s next?
- The creditors vote on whether to accept the offer
The Outcome
- If the offer is accepted:
– The arrangement is binding upon the bankrupt and creditors
– The bankruptcy is annulled
A Personal Insolvency Agreement (a ‘Part X’)
How did we get here?
- An alternative to bankruptcy
- An individual may be unable to repay debts.
- The insolvent individual negotiates a repayment plan with the trustee
– The Personal Insolvency Agreement (PIA) may pay off all, or part, of the debts via a lump sum or by instalments
What’s next?
- The creditors may vote to accept the PIA
-This normally provides them with a better outcome than bankruptcy
The Outcome
- The Personal Insolvency Agreement is binding upon the bankrupt and creditors
- Bankruptcy is avoided
A Debt Agreement (a ‘Part IX’)
How did we get here?
- An alternative to bankruptcy
- An individual may be unable to repay debts.
- An arrangement is drawn up between the debtor and creditors to settle debts
– The agreement should include plans for unsecured debts
What’s next?
- The creditors may accept the Debt Agreement
The Outcome
- The Debt Agreement is binding upon the bankrupt and creditors
- Bankruptcy is avoided
Restructure and Turnaround
How did we get here?
- A company is experiencing:
– financial difficulties
– Loss of clients or key management
– Dramatic changes in the market
What’s next?
- Work with financial professionals
- An expert restructuring and turnaround team will
– Review the financial situation and company financial structure
– Identify - Options to increase revenue or reduce expenses
- Options to renegotiate payment terms for finance agreements
- Strategies to raise funds via the recovery of outstanding payments from debtors or the sale of assets (with limited impact on the company’s core business
- Other funding opportunities
- Training in alternative ways of working
The Outcome
- Liabilities are reduced or deferred
- Cash flow problems are resolved
- The business has an improved financial situation
- The company continues to trade successfully and profitably