DIFFERENCE BETWEEN VOLUNTARY ADMINISTRATION AND LIQUIDATION

What is voluntary administration?

 

When a company cannot meet financial commitments and associated obligations, placing the insolvent or near insolvent business in voluntary administration is an option. A voluntary administrator, usually appointed by the company, oversees the process.

 

This creates a window of time in which either relevant stakeholders or potential new investors can devise a plan to save the business. During this temporary moratorium (approximately five weeks), claims of creditors are generally frozen.

 

If creditors agree in a general meeting to the proposed terms, an agreement is documented. The Deed of Company Arrangement (DOCA) is an enforceable agreement, meaning action can be taken if terms are not met.

 

Barrett Walker offer voluntary administrations that provide your company with independent assessments before allowing for negotiation of a viable plan that meets with creditor approval. With no DOCA, the company will likely be placed in liquidation.

What is liquidation?

 

Liquidation occurs when a company can no longer continue meeting financial obligations and is insolvent. Marking the end of the company, this insolvency process involves a liquidator taking control. Company assets are then used to address the business’ debts.

 

In part, the liquidation process is an adjudication at to the rights of creditors who dealt with the company..

 

Ray Barrett is a registered and experienced liquidator who can act as a court-appointed liquidator. In this role he will:

 

• Investigate the causes of a company’s insolvency
• Assess decisions of director(s) and associated  parties
• Notify ASIC of any wrongdoings
• Consider and where appropriate commence legal action  to recover  assets for creditors
• Use surplus funds to pay dividends to creditors in the priority as set out in the Corporations Act 2001

Alternately, creditors’ voluntary liquidations see the Barrett Walker Melbourne liquidator appointed by the company 

 

The same essential actions are carried out as with court liquidations, a key difference being the ability of the directors and members to determine the timing of the commencement of the liquidation and choose a liquidator  We initiate a comprehensive and concise course of action to facilitate an effective and thorough liquidation.

Core differences

 

In basic terms, an insolvent or near insolvent company instigating voluntary administration may be able to devise a way to remain functioning as a business.

 

Liquidation, on the other hand, recognises the company can no longer function. The focus from this point is on the distribution of the company’s assets in a way that returns the most value to the company’s creditors.

 

Liquidation in Melbourne can happen by way of a court order, or be instigated voluntarily by the company. As insolvency specialists, Barrett Walker excel in this area of business due to our unique multidisciplinary perspective.

How are voluntary administrators appointed?

 

The Corporations Act 2001 makes it clear persons entitled to appoint an administrator are the company, a liquidator, or a person entitled to enforce a security interest. The voluntary administrator has eight days to convene a meeting of creditors.

 

Members of Barret Walker are able to,take appointments to the position of voluntary administrator. Our financial, legal, and accounting expertise mean we assess and provide informed advice, and invaluable assistance to your company.

 

Discussing your options

 

As leading liquidation advisors in Melbourne our team focuses on clear, practical solutions. We understand the position of creditors, and the company. Barrett Walker provides free thirty-minute consultations, so let’s deal with the situation together proactively.