Voluntary Administration Process
Are you a Director considering Voluntary Administration for your company?
Voluntary Administration, or VA, can be the perfect solution for a company that is in financial difficulty. Or Not !
Did you know that of all companies that enter Voluntary Administration only 26% are saved.
That statistic alone should tell you that you need a genuine expert to help your company through the Voluntary Administration process. At Restructuring Works we specialise in saving companies.
Why not call one of our experts now on 1300 166 765 for CONFIDENTIAL FREE ADVICE to help decide if Voluntary Administration is right for your company. If you would like us to call you back complete our Contact Form here.
If you’d like more information before calling us read on as we have all the information you need. Firstly, why not check online if Voluntary Administration is the right solution. You can assess your company’s situation by firstly checking Is My Company Insolvent? and then check if it is the right solution by Asking IRA! IRA, our Interactive Restructuring Adviser, will ask you four easy questions then give you our suggested solution.
Still want some more information, then we’ll explain for you some practical aspects of Voluntary Administration. Voluntary Administration places an insolvent company in the hands of an independent person who can assess all the options available to generate the best return for creditors and shareholders. In some cases, the owner may be able to retain control or a part share in the business. In other cases the business can be sold as a going concern and employees may be able to retain their jobs. We have a page that explains why a Voluntary Administration through Restructuring Works is the best way to go.
Just remember a Voluntary Administration:
- is inexpensive to initiate;
- creates the opportunity to maintain a business;
- provides creditors with an independent review of the company and its business; and
- provides a mechanism to negotiate a compromise between a company and its creditors.
Directors have a strong incentive to address corporate insolvency. Personal liability arises from the severe insolvent trading provisions of the Corporations Act and the tough Director Penalty Notices, or Section 222 Notices, issued by the Australian Taxation Office. The personal liability notices issued by the Australian Tax Office require a company to pay various tax liabilities within 21 days or the directors will become personally liable for the debt, unless an administrator or liquidator is appointed.
The insolvent trading laws can make directors personally liable for debts incurred whilst a company is insolvent. Therefore, one of the strengths of the voluntary administration process is that it limits director’s personal liability.
A company can avoid liquidation if creditors believe the administrator’s proposal will provide them with the best commercial return. If not, they may return the company to its directors, or more commonly, force liquidation of the company without the need to hold further meetings or petition the Court.
Voluntary Administration triggers a moratorium on any recovery action by creditors, and at the same time the directors’ powers cease. It stops the enforcement of guarantees against directors. The only exception is that a lender with a mortgage over all of the assets of the company may enforce its security within a 10 business day decision period.
The appointment of an administrator is usually made by a company’s directors. The administrator will take control of the company and continue to maintain the business, if that is the best option.
A proposal for the way forward can be accepted by a simple majority of creditors. Once accepted, it becomes formalised as a Deed of Company Arrangement, which binds all unsecured creditors, including those who did not vote. This power to coerce an unreasonable minority of creditors is one of the procedures strengths.
The length of time involved in the voluntary administration process varies. A Deed of Company Arrangement can be finalised in two or three months after the appointment of the administrator. If appropriate, the terms of the deed can last for several years.
If the company does not meet its obligations under the deed, it can be terminated and the company wound up, but this is not automatic. Before you decide to start a Voluntary Administration make sure you check it is the right solution for your company by Asking IRA!
If you want to understand more then go to our page Voluntary Administration through Restructuring Works.
