VOL­UN­TARY AD­MIN­IS­TRA­TION

Collective Hub - - FEATURE - WHAT IT IS: WHEN IT’S BEST: THINGS TO CON­SIDER: IT HAP­PENED TO:

A pro­ce­dure that the di­rec­tor or di­rec­tors of a com­pany can en­ter into when they know that their com­pany is in­sol­vent, but be­lieve it can trade out of its in­sol­vency. “In this case a per­son in­de­pen­dent of the com­pany, and reg­is­tered to be an ad­min­is­tra­tor, will be ap­pointed by the di­rec­tors,” says Jeremy. “Their pur­pose is to de­ter­mine if the com­pany can trade out of its in­sol­vent po­si­tion, or whether it’s best to liq­ui­date.”

If you truly be­lieve re­cov­ery is pos­si­ble, even if things might have to get worse be­fore they get bet­ter. “Di­rec­tors of a com­pany use a vol­un­tary ad­min­is­tra­tor so they’re not ac­cused of in­sol­vent trad­ing,” says Jeremy. Un­der the Cor­po­ra­tions Act in Aus­tralia, if a com­pany is in­sol­vent and a di­rec­tor al­lows the com­pany to in­cur new debt, they can per­son­ally be held li­able.

Don’t be over-con­fi­dent. “In my ex­pe­ri­ence, most busi­ness own­ers be­lieve they can trade out of an in­sol­vent po­si­tion,” says Jeremy. In fact, crunch­ing nu­mer­ous re­search sources it looks like vol­un­tary ad­min­is­tra­tion only saves around two per cent of in­sol­vent busi­nesses.

Top­shop Aus­tralia. Ear­lier this year, al­most six years af­ter open­ing its first store in Mel­bourne, the Aus­tralian fran­chise of the Bri­tish high street brand an­nounced that re­struc­tur­ing firm Fer­rier Hodg­son had been ap­pointed to con­sider its “op­ti­mal op­er­at­ing struc­ture”. With nine stand­alone stores and 17 Myer con­ces­sions, all parts of the busi­ness are cur­rently be­ing re­viewed.

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