Is your business facing financial difficulties? Help your business survive through Voluntary Administration
Voluntary Administration Can Lead to Positive Results for Your Business
The Voluntary Administration (VA) process has achieved impressive results for businesses Australia-wide by providing for the administration of insolvent or near-insolvent companies. This allows for a better outcome for all parties involved, especially creditors and employees. The main objective of VA is to maximise the chances of a business continuing to exist. This process assists companies with cash flow problems, allowing for the position of all creditors to be frozen for a short period of time while investigations into the affairs of the business can take place. After the investigation, the appointed Voluntary Administrator will determine whether a proposal of reconstruction, a Deed of Company Arrangement (DOCA) can be put in place or if the company will proceed into Liquidation.
There are many benefits of using the VA process to assist a financially unstable business. The actual process itself is flexible, easily commenced, timely and cost-effective.
What Constitutes a Successful Voluntary Administration?
The best outcome which can be expected from the VA process is to reduce the losses suffered by creditors and shareholders and possibly save your company. There are 3 key elements of a successful Voluntary Administration process.
Warning Signs of Company Insolvency
Insolvency is the greatest fear for many businesses, especially in an uncertain or volatile economic climate. While Australia’s economy is stronger than it was during the global financial crisis, there is still a real risk of businesses becoming insolvent for any number of reasons. That’s why it’s important for company directors and business owners to understand the risk factors for insolvency and act to mitigate the risk as soon as possible.
The biggest issue for companies on the Gold Coast is that directors ignore or don’t recognise the warning signs, then leave any corrective action until it’s too late. While there are strategies to turn a business around, the best approach is to avoid hitting that worst-case scenario through early intervention.
You need to monitor your business closely and, if it starts to demonstrate any of the below warning signs, take action immediately and seek professional advice.
- Inadequate cash reserves
- Poor cash flow management
- Inability to access finance
- Late payments
- Staffing issues
- No clear business model
- Reluctance to address issues
How Will a Deed of Company Arrangement Impact Your Business?
Arranging a DOCA provides your company a way to move forward after finding itself in financial difficulty. A DOCA is a binding agreement between your company and your creditors, which governs how your company’s affairs will be dealt with. If your company can continue its business, a DOCA may result in a better outcome for all parties involved rather than winding up your company and going through Company Liquidation.
The effects a DOCA will have on your company include:
- The DOCA binds your company, its creditors, members and the Deed Administrator.
- While your company is under a DOCA, it must include the words ‘Subject to a Deed of Company Arrangement’ on all public documents and contracts.
- You must abide by the terms of the DOCA or risk termination of the DOCA, which automatically leads to Liquidation.
- A DOCA’s terms can be varied at any time during its life by resolution at a meeting on creditors.
- The DOCA finishes after you make all final repayments to your creditors.
Rehabilitate Your Company with Voluntary Administration on the Gold Coast
At Revive Financial, our aim is to listen to your company’s situation, act quickly and guide and support you through the best options available. You can rest easy knowing your business is in good hands with us, having over 43 years of combined experience supporting businesses through the Voluntary Administration process on the Gold Coast and surrounds. Our team consists of business debt and insolvency specialists including Chartered Accountants, Registered Liquidators, Bankruptcy Trustees and business advisors.