It comes as a surprise to many directors to learn that the Corporations Act is actually designed to help directors, rather than punish them – it promotes Voluntary Administration as the legally binding way to save a business.
Being a director of a company under financial distress is a difficult and stressful time. You may well be faced with the situation of having a viable business, but it needs some breathing space to restructure or to do a deal with creditors.
Is a Voluntary Administration right for your company?
A company that should consider a Voluntary Administration is one that:
- Is insolvent so needs a deal with creditors;
- Often had a one-off loss or a bad trading period which caused the problems;
- Has a viable business but needs a freeze on creditors to allow time to cut debts, reduce costs and staff, and give some time to rebuild sales and profit margins.
We offer the complete VA solution
At Restructuring Works, we are restructuring professionals. We are experienced in finding the right path through the complicated area of insolvency and the Corporations Act. If Voluntary Administration is the right solution for your company, we will help you at every step of the insolvency process. We do this by:
- Working with directors to quickly assess the possibility of a successful Voluntary Administration
- Helping directors prepare a proposal or Deed of Company Arrangement (“DOCA”) to be put to creditors
- Being appointed as the Voluntary Administrator
- Explaining the DOCA to creditors
- Assisting the implementation of the DOCA
What is Voluntary Administration?
Voluntary Administration refers to a process under the Corporations Act, where an insolvent company is placed in the hands of an independent person who can assess all the options available, and generate the best outcome for a business owner and for creditors.
A Voluntary Administration is easy to initiate – it’s just a Resolution by a majority of directors – and can usually be completed in a little over a month. During that time, there is a moratorium on any recovery action by creditors against the company and it stops the enforcement of personal guarantees against directors. A Voluntary Administration is designed to avoid the involvement of the Courts.
The objective is that at the end of the Voluntary Administration period, there is a vote of creditors to accept the deal put to them – that deal is called a Deed of Company Arrangement (“DOCA”).
- The DOCA that is proposed can be designed to suit the situation but will usually involve creditors accepting less than their full debt, possibly some reorganization of the business operations, and return of control of the company to the directors.
- This can sound like a daunting process for a director – and it can be difficult – which is why you need to be advised and led through the process by the experts at Restructuring Works