It's time to administrate or liquidate
Not sure which way to turn?
Here’s a few insights on the liquidation process to get you started:
When a business can’t swiftly turn itself around, looming company insolvency soon progresses to voluntary administration, receivership or liquidation proceedings. While a business’ demise can sometimes be fairly pain-free, more often than not, particularly in cases of high debt and long lists of business creditors, insolvency is the catalyst for a great deal of interpersonal conflict.
Directors can be personally investigated and sued for the debts of the company, creditors can be pursued for receiving preferential payments, and court proceedings can raise their head in a moment’s notice. In any event, you’ll need a heavy duty litigator to protect your best interests.
By finding an insolvency lawyer who can navigate your insolvency circumstance, but who can also represent litigants in court will mean less headaches and costs for you in the long run. RCR Insolvency are a team of insolvency lawyers with a full breadth of litigation experience, so you won’t need to sit waiting for emails from your litigator before you can move forward you can move down the best insolvency pathway.
You may have already decided that your business is doomed but have you really considered all your options and at the very least bought yourself some time to mitigate your personal risks as a director?
Voluntary administration essentially freezing the business, during which time an administrator will look at the situation and advise upon the best course of action for the company. During this period you won’t continue to accrue debt and creditors will have to put a hold on pursuing you for the money they are owed.
While the outcomes of voluntary administration may surprise you and put you back on track to business profitability, it also provides you with time to look at what your personal outcomes and obligations are as a director. In the face of a business’ demise it is important to look at the future for yourself as well as the future of the business.
Partnering with an experienced insolvency lawyer can assist you with understanding your personal circumstance and that of the business in the face of looming insolvency.
Outcomes of Voluntary Administration
- Directors can protect themselves from being deemed in any further breach of their directors duties for insolvent trading
- There may be a path for business turnaround that benefits the debtor and creditors alike
- There may be the opportunity for negotiation with creditors that reaches a better outcome for both the debtor and creditors
Phase 1: A decision is made to appoint an administrator
Phase 2: A voluntary administrator is formally appointed
Phase 3: An initial creditors meeting is held
Phase 4: The administrator investigates the company’s affairs and issues a report to creditors
Phase 5: A meeting is held to decide on the company’s future and creditors determine the outcome at the meeting:
- Creditors decide to return the company to the control of directors
- Creditors decide to accept a deed of company arrangement
- Creditors decide to put the company into liquidation
Phase 6: Company signs a deed of company arrangement and the administration of the deed begins, or if there is no deed, then liquidation commences.
You may have taken steps to voluntarily liquidate, however there is a chance it might not go ahead as you planned. In the event that a liquidator, appointed to bring a company to an end, believes there is a chance that creditors will receive more from company administration, they can choose to hand back the reins to an administrator to try to implement a deed of company arrangement.
Don’t forget directors who act in the best interest of an insolvent company and any associated creditors will be more highly regarded in the liquidation process should it eventuate. In turn their personal obligations to repay company debts may be more lenient. As such, it is advisable to establish whether or not liquidation is your only option before charging ahead. The best way to attain this information? Speak to a lawyer.