Jobs saved and creditors paid: Results of Voluntary Administration

The process of Voluntary Administration in the past achieved quite impressive results in Australia by providing for the administration of insolvent or near insolvent companies and allowing for a better outcome for all involved, especially the creditors and employees.

The main objective of Voluntary Administration is to maximise the chances of a company continuing to exist. This process assists companies with liquidity problems, allowing for the position of all creditors to be frozen for a short period while investigations into the affairs of the company can take place. After this investigation it will be determined whether a proposal of reconstruction or a Deed of Company Arrangement (DOCA) can be put in place or if the company will proceed into liquidation.

Many benefits are evident from the Voluntary Administration of a company. The actual process itself is flexible, easily commenced, timely and cost effective. It is accountable to creditors with a detailed report on the affairs of the company being prepared, outlining whether the company should execute a DOCA, whether the administration of the company should end, or if the company should be would up.

Creditors accepting a proposal of a Deed will receive a better dividend than if the company is placed into liquidation. In addition, a DOCA allows the company to remain in business, meaning staff will keep their jobs, suppliers will keep their customer and the economy of the State will benefit from its economic activity.

In the absence of a DOCA, the Administrator will recommend that insolvent companies be wound up. This allows an orderly procedure to distribute the company’s assets to those creditors entitled to benefit from that distribution. A Liquidator also has more power to make recoveries for the benefit of the creditors.

Voluntary Administrations can provide a useful tool in helping to regain a company’s financial stability and provide a better financial return for all parties involved.

Macks Advisory can help businesses implement the voluntary administration process in order to help give business owners the second chance that may be needed to grow and survive. Members with queries are invited to contact Peter Macks at Macks Advisory on 08 8231 3323 or pmacks@macksadvisory.com.au.