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VOLUNTARY ADMINISTRATION

There is no doubt that running a successful business is getting tougher and tougher in Australia. With competition white-hot, it is likely that many small to medium enterprises can wade into difficult financial waters.

During financial trouble, it is important that business leaders recognise their options – with one possibility being Voluntary Administration. Read on to find out what a Voluntary Administration is, how it can help your enterprise, and the key details of this process.

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WHAT IS VOLUNTARY ADMINISTRATION?

As the name suggests, Voluntary Administration is an optional avenue for business leaders who are facing financial difficulty. This means that enterprises with the foresight and knowledge to predict issues may adopt the approach before the situation gets worse.

To maximise the chances of the company continuing, Voluntary Administration is a smart choice. Put simply, Voluntary Administration sees an entity appoint an independent External Administrator who takes full control of the company’s affairs to determine how the business will progress moving forward. If a business leader believes that their business could become insolvent in the near future, the appointment of an administrator is a positive step to make.

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FAQS

How long does an Administrator work with a business?
An administrator enters a business for a particular length of time during Voluntary Administration. This length of time is generally 4 to 5 weeks.

During this time, the administrator has to deal with the company’s affairs, conduct investigations and report their findings to the creditors. Depending on the situation, the administrator can also seek and order for an extension of time from the Court, to ensure they have enough time to assess the business in detail.

Over the course of the administration period, an administrator drafts and circulates open reports about what they have found – both positive and negative. These are discussed as part of meetings with creditors to ensure an open communication channel during the administration.

In fact, there are usually two meetings held during a Voluntary Administration, an initial meeting, and a major final meeting to finalise future plans.

What does an Administrator do?
When appointed, an administrator takes on the responsibility for trading, decision-making and all liabilities incurred during the administration process. Within five business days of being appointed, an administrator must have a meeting of creditors, at which time the administrator’s appointment is ratified or an alternative administrator is appointed by a vote of the company’s creditors.

Within 28 days of appointment, a second meeting is held and a report is prepared to creditors detailing the investigations conducted by the administrator into the company’s affairs together with a recommendation to the creditors for the company to either be placed into liquidation or enter into a Deed of Company Arrangement.

What is the cost of Voluntary Administration?
Voluntary Administration is not the solution to every problem, and cost is often a limiting factor. The cost varies widely depending on whether the company continues to trade, the size of the organisation and the complexity of the proposed strategy.

The cost can be covered by the value of the company’s assets if they are being put to sale, or the company’s ongoing turnover if it continues to trade. We’ll make an assessment during your consultation and if there looks to be a shortfall, we may require a contribution to cover our costs.

What is a Deed of Company Arrangement?
During times of serious debt, business leaders have the opportunity to form a DOCA between the company and its creditors. This binding arrangement is essentially a blueprint for how the company plans to resolve its debt issues without moving into liquidation.

Business directors and/or a third party formulate and propose the DOCA during a voluntary administration, before it is published in the administrator’s major report for creditors. Upon review of the DOCA, creditors are asked to accept the terms and pass a resolution that the company can execute the DOCA. This usually occurs as part of a major creditor meeting.

What are the advantages of Voluntary Administration?

A company that is placed into Voluntary Administration does not necessarily mean that is it the end of the company or business.

Advantages of placing a company into Voluntary Administration include:

  • It gives statutory protection from legal action
  • Allows the director time to refocus and improve the business
  • The administration can improve the profitability of the company
  • It permits negotiation with company creditors
  • Stops insolvent trading.
  • The company can continue to operate and trade.
  • The director avoids personal liability

OUR INSOLVENCY ASSISTANCE SERVICES

At Corporate Lifeline we have an array of services to cater to any phase your business is in financially.

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Liquidations

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Bankruptcy & personal insolvency agreements

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Receiverships

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Small Business
Restructuring

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Agent for Mortgagee
in Possession

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DOCA

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REAL PEOPLE, REAL REVIEWS

Group 294
I found Corporate Lifeline to be very understanding of my situation. I was so stressed about my company being in jeopardy but I can relax now, knowing that I was given a solution and I can carry on trading.

Erin Djemal

Group 294
After meeting with Kathleen, we felt that we’d met someone we could put our trust in and who would leave no stones unturned to help rescue our business. Kathleen took early decisive action to reduce costs, maintain the loyalty of customers and key staff and find a viable way forward for our company. I found them to be very approachable and well connected, which was instrumental in turning our company around.

Mark Griffin

Wollongong
Group 294
It was a hard pill to swallow but it had to be addressed. I made the call to Corporate Lifeline and they were extremely helpful. They helped us to explore the possibilities to find any way forward but Liquidation was going to be our best option for the business. The process from very straight forward for us and there was a lot of help and lots of contact with them throughout the whole process.

Tony Cameron

Brisbane
Group 294
Having traded successfully for over 15 years, it was devastating to realise that losing a key client would put our company into insolvency. But after speaking with the team at Corporate Lifeline I could see that we should’ve called them six months earlier. They were informative and supportive from the outset, which would have avoided months of stress and sleepless nights. Restructuring our company through the Voluntary Administration has put our company in a strong position and is now growing again. We are grateful for their time and expertise.

Kate Davy

Perth

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