Free your company from its debts and return to a positive cash flow with Voluntary Administration
Voluntary Administration Experts on the Sunshine Coast
Voluntary Administration (VA) is a process which is designed to be a quick and easy way to resolve a company’s future. It is often used to provide protection for an otherwise viable company that has encountered financial difficulty due to circumstances possibly beyond its control. If your company is still in operation but you have concerns over its trading in the future, appointing a Voluntary Administrator can help. They will conduct a review of the viability of your company and decide whether you should continue trading, with a view to achieving a restructure of your business or a sale. The VA process allows for a proposal for a Deed of Company Arrangement (DOCA) to be put to your creditors for their consideration.
In essence, a DOCA is a contract which outlines what benefit your company will provide to its members and creditors in exchange for settlement of all debts and claims against it. Once your company is in VA, the future of your company is decided by your creditors.
Generally, when a company is facing financial troubles, company directors often adopt a ‘head in the sand’ mentality rather than seek early advice on options which are available to help. This denial of early insolvency warning signs is usually in hope that things will improve, but it is often a detriment to the business. You need to act quickly and seek advice as soon as possible to give your company the best chance at survival.
Potential Outcomes of the Voluntary Administration Process
The purpose of the VA process is to try and save your company and/or its business and to provide your creditors and members with a greater return than would be available if your company were to go straight into Company Liquidation. The three potential outcomes from the VA process are as follows:
- You and your creditors agree to implement a DOCA,
- Your company gets handed back to you, or
- The Voluntary Administrator decides your company does not have a viable future and therefore will go into Liquidation.
The keys to a successful Voluntary Administration which results in a DOCA include:
- Early identification that your company is suffering cash flow difficulties, may be insolvent and seeking advice on available options,
- Determining whether the underlying business is viable. If your company goes through the VA process only to fail a few months later, Liquidation may be a better option.
- Formulating the correct restructuring strategy to rectify the cause of the cash flow difficulties.
Appointing a Voluntary Administrator
Appointing a Voluntary Administrator is an easy process and doesn’t involve the courts or other complicated processes. The most common method of appointment is by the directors of your company and is done by singing a Resolution document. If there is more than one director, a majority must sign in agreement. The Voluntary Administrator, however, can be appointed in three ways:
- By the directors of your company,
- By a Liquidator if the Liquidator decides a business cannot be saved, and
- By a secured creditor – but this is fairly rare.
Be wary of those who don’t carefully assess your circumstances. Make sure you check the Administrator who you choose is registered through the Australian Securities and Investments Commission (ASIC) under the Corporations Act.
What Happens to Your Company During Voluntary Administration?
Seek Professional Advice Quickly and Save Your Company From Liquidation
We understand the stress that comes with mounting business debt and how hard the next decision is. The financial problems of your business may be resolved without the need of a formal insolvency appointment such as Voluntary Administration. To find out, get in touch with our professionals who will assess your company’s situation and determine the best option moving forward. This could be a business restructure or turnaround strategy, Voluntary Administration, or Company Liquidation.
Our friendly, approachable team of Chartered Accountants, ASIC Registered Liquidators, Bankruptcy Trustees, Turnaround Specialists and Financial Advisors with over 43 years of combined experience have been supporting companies in manufacturing and associated industries on the Sunshine Coast and surrounds get back on track for years.