Voluntary Administration in Wollongong & NSW
Starting Voluntary Administration in New South Wales
If your Wollongong based business is experiencing financial difficulties and is unable to pay its debts, voluntary administration can give you the breathing space you need to assess your options and form a plan without creditors chasing payment. Where appropriate, you can continue trading.
Voluntary administration is a formal insolvency appointment that means handing over your company’s affairs to a New South Wales administrator. The process typically takes 25 days (or 30 days if over Christmas or Easter). In some situations, the court can agree to extend this.
You may be wary of voluntary administration, but it actually offers many benefits. It can provide a quick resolution to your struggles, improve your chances of staying in business, and ease the mental strain. It also typically offers a better outcome for creditors than liquidation and can avoid legal action.
How Voluntary Administration Works in Wollongong
Appointing An Administrator
Once you’ve decided voluntary administration is the best option, you must appoint an independent, registered administrator. They’ll assess your viability, manage your affairs and help you devise a plan.
Drawing Up A DOCA
Your administrator will help you prepare a deed of company arrangement (DOCA). This is a binding agreement between you and your creditors that sets out how you’ll service debts.
The Creditor Decision
A meeting with your creditors is called to decide your future. During the meeting, your creditors can vote to give you back control, accept your DOCA, or agree to put your company into liquidation.
Brian owns a medium-sized Wollongong construction company that had found itself in financial difficulties.
Part of the reason for the company’s financial struggles was economic slowdown. This resulted in a drying up of work and unmanageable debt levels. Finances had also been in the control of the finance manager, who hadn’t immediately alerted Brian to any issues.
Brian had attempted to rectify the problem by making quick fixes, such as eliminating all unnecessary spending, over a period of months.
When Brian contacted us, he was feeling stressed and overwhelmed. He had built the New South Wales business up over many years and didn’t want it to close. He also felt the responsibility of having to pay wages and didn’t want to let any of his employees down.
We came in to assess the business and determined that it was still viable. As administrators, we then set about communicating with stakeholders, making changes and drawing up a DOCA.
Creditors Accepted The DOCA
The creditors voted by majority to accept the DOCA and received a partial return on their debt.
Employees Kept Their Jobs
The plan meant the debts were to be covered by future profits and selling assets.
A Black Cloud Was Lifted
Brian felt relief in the positive outcome and the mental strain gradually eased.
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Frequently Asked Questions
How Long does Voluntary Administration Last?
The Administrator must submit their report to the creditors 5 weeks from the date of their appointment. For more complicated cases, this timeframe can be extended.
Why Enter Voluntary Administration?
Voluntary Administration provides much-needed breathing room for companies in financial difficulty. During the Voluntary Administration period, your creditors must stop their collection activities. Your administrator will also look at your company structure to see if it can be saved. The Administrator might find the company is heading towards insolvency.
If your company is only in short-term financial trouble, Voluntary Administration is the best solution for you.
How do I Start Voluntary Administration?
To enter Voluntary Administration, the Directors must pass a resolution in a Board meeting. They must then present the vote in writing and appoint an administrator.
How Much does a Voluntary Administration Cost?
Each Administration is different so there is no one answer. The cost of the Voluntary Administration will depend on:
- the size of the company
- the complexity of the financial hardship
- the number and type of creditors
- the work that needs to be performed.