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Voluntary Administration
Voluntary administration allows great flexibility
in restructuring a business to achieve the best
outcome for the company, its creditors and employees.
When a company is insolvent or likely to become
so, and there is a prospect that all or part of
the business may be saved and traded on, directors,
secured creditors or a provisional liquidator may
appoint a registered liquidator to assume control
of the business. The objective of a voluntary administration
is to maximise the chances of the company or its
business to continue in existence and to provide
creditors and members with a better return than
would be achieved under an immediate winding up.
The voluntary administrator has an initial period
of 28 days to investigate the company's affairs
and make a recommendation to creditors about the
future of the business. The majority of creditors
must decide at a meeting convened by the voluntary
administrator, the company's future. The options
may include, selling a business as a going concern,
realising the assets piece-meal and winding up the
company, implementing a Deed of Company Arrangement
which may result in the company being returned to
the control of its directors, or returning the company
to the directors in its current state.
During the voluntary administration, creditors
cannot initiate winding up proceedings and directors'
guarantees cannot be enforced.
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Deed of Company Arrangement
Deed of Company Arrangement is one of the 3 options
available to creditors from the voluntary administration
process. After the ratification by creditors of
a proposal made by the company's directors, or another
party during a voluntary administration, the deed
is legally binding between the administrator, directors
(or party putting forward the Deed) and all creditors,
with the exception of creditors who hold personal
guarantees from the directors. Subject to the terms
of the Deed, the administrator may be required to
monitor the terms of the Deed to ensure its conditions
are fulfilled. A Deed, is generally used when the
outcome gives creditors a greater return then they
would have achieved through liquidation and may
allow a business to continue trading.
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Creditors Voluntary
Liquidation
The Creditors Voluntary Liquidation can occur by
2 means:-
1. Directors/shareholders who no longer wish to
continue trading may by a series of meetings involving
the company's directors, shareholders and creditors
appoint a liquidator to wind up the company's affairs.
2. If a deed proposal in a voluntary administration
is unsuccessful, creditors may vote to wind up the
company. The administrator becomes the liquidator
of the creditors' voluntary liquidation.
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Members Voluntary Liquidation
Where a company is solvent and the members wish
to finalise its affairs and regain their capital
this type of liquidation is utilised. Once appointed
by members of the company, the liquidator distributes
the assets. Tax benefits may apply to distributions
made under this process.
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Official Liquidation
/ Provisional Liquidation
Where a company is insolvent or a dispute between
the owners of a business exists which cannot be
resolved, an Official Liquidator may be appointed
by the Court to manage the liquidation in accordance
with the requirements of the Corporations Act. A
Court liquidation may be initiated by parties associated
with the company, or by unsecured creditors applying
to have a defaulting Debtor Company wound up. The
Official Liquidator takes control of the company's
assets and realises them so as to provide the greatest
possible return to creditors. The Official Liquidator
has a duty to fully investigate the financial affairs
of the company to determine if the grounds exist
for legal recovery action. The Liquidator is also
required to lodge a report detailing the outcome
of his investigations and offences committed with
the Australian Securities and Investments Commission.
In certain instances where the company's assets
are in jeopardy, a provisional liquidator may be
appointed to protect a company's assets until the
winding up order is made. Peter Lucas is an Official
Liquidator of the Supreme Court of Queensland, with
extensive experience in conducting official liquidations.
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Receiver and Manager
A Receiver and Manager is normally appointed by
a secured creditor (usually a bank) under the powers
of a valid charge. The Receiver will realise all
or some of the company's assets for the benefit
of the secured creditor. In certain instances a
Receiver and Manager may work in conjunction with
an Voluntary Administrator and/or a Liquidator.
A Receiver and Manager acts primarily for the secured
creditor, not for unsecured creditors.
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Court Appointed Receivership
The powers which a court appointed Receiver has
are determined by the order of the Court which appoints
the Receiver. The Court may appoint a Receiver or
Receiver and Manager of a company where it considers
it necessary to protect the interests of any persons
to whom the company is, or may become liable and
where assets are in peril and need to be safeguarded.
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Controller
A Controller is generally appointed by a secured
creditor to take control of property that is the
subject of a debenture. The mortgagee is able to
direct their appointed Controller to a greater degree
than is possible in a receivership. The Controller
will realise the asset for the benefit of the mortgagee.
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Deregistration
Deregistration is an alternative to members voluntary
liquidation. If a company has assets less than $1,000,
no liabilities, is not party to any legal proceedings
and has ceased to carry on business, then deregistration
is a quick and inexpensive means of removing the
company from the Australian Securities and Investments
Commission register.
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