What is Voluntary Administration ?
There are many factors that need to be taken into consideration before deciding to enter Voluntary Administration.
- Effects on personal guarantees
- Payments to Creditors
- What will happen to the staff and their wages
- Tax liabilities
- Superannuation
- Holiday and long service leave
- Loan accounts
- Working capital for the business
- How your customers will take the news
- Reaction of the bank or your secured creditors
- Effects on the directors personally
- Effects on personal / family life
- Choosing the right administrator
- Liquidation – v – Voluntary Administration
- Effects on Company Directors.
Voluntary administration is an alternative to placing your company into Liquidation.
Liquidation means you shut the doors and all the assets of the business are sold in a fire sale usually to your opposition and the company and business close.
Voluntary Administration is an alternative to Liquidation that allows a short period of time to propose a deed of company arrangement (DOCA). This period of grace is given so you can negotiate with your creditors whereby you propose a compromise to pay what you owe them over a longer period of time and usually a lower dollar amount.
This process aims to get your company back on its feet, and continue trading and protect the goodwill and jobs of your employees, successfully.
The Voluntary Administrator assumes liability for the company during the time they are in control. If you are successful to provide enough working capital to trade the business and are successful in your creditors voting in favor of your DOCA proposal, the company is handed back to the Director and the business will survive.
Strict conditions are usually placed on the Company during the DOCA period to ensure debt levels don’t rise and your liabilities are being met as and when they fall due
What is the effect of voluntary administration?
Once voluntary administration is entered by the company, this will generally prevent the company being sued by its creditors, which is called ‘the statutory moratorium.’ During the voluntary administration any personal guarantees by the director of the company are also deemed unenforceable. This moratorium on claims against the company allows the company breathing space, so it can be evaluated whether it should be wound up or rescued.
We are here to assist and prepare you for the Voluntary Administration process. There is a lot of uncertainty leading up to the Voluntary Administration however having your hand held combined with the right advice will ensure correct decisions are made at critical times.
While most of our clients are in Brisbane, Sydney and Melbourne, we look forward to assisting you with your voluntary administration needs.
