The main purpose of a Voluntary Administration is to provide a company with a viable alternative to winding up where there is scope for restructuring its financial affairs. In some cases a Voluntary Administration is also considered where there are other concerns such as the maximisation of the asset values of a company in circumstances where any unreasonable delay will result in a significant reduction which is likely to impact on a return to creditors.
Time and time again we hear about efforts and systems that the Australian Taxation Office will implement to toughen their stance on the collection of their debt. The question is; Is it working? The answer to this would have to be a resounding “NO” as disclosed in a recent report to the Assistant Federal Treasurer, the total debt owed to the ATO increased to $35B as at 30 June 2014 which was a jump of almost 10% from the previous year.
Not sure if your Company is in financial difficulty? Is my Company insolvent? Have the economic conditions affected your cash-flow? Is the ATO putting pressure on you? Are customers giving you excuse after excuse? Are your creditors keeping you up at night? Are you worried about personal exposure? Take the test.
A Creditors Voluntary Liquidation involves the directors and shareholders resolving to wind up the affairs of the company due to the insolvency of the business and effectively stop trading.
A Creditors Voluntary Liquidation can occur when a company has been placed into voluntary administration and a proposal for a Deed of Company Arrangement has not been accepted by creditors or terminates.
Directors and shareholders of a solvent company can appoint an insolvency expert to deal with the orderly wind down and distribution of company assets.
The purpose of a Deed of Company Arrangement is to formalise a proposal made by the directors during the Voluntary Administration, which has been approved by creditors. A Deed of Company Arrangement is a legally binding document between the company, its creditors and the Administrator.
When a business encounters financial difficulties it can be disturbing and traumatic, especially if you are the only one carrying the burden. It is important to have a professional advisor to call on that will provide understanding and advice to ease the financial stress, therefore allowing you to get on with more productive matters.