Recently there has been a plethora of articles in the Australian media regarding businesses entering into voluntary administration. According to ASIC, the purpose of a Voluntary Administration is to resolve a company’s future direction quickly. An independent and suitably qualified person (the Voluntary Administrator) takes full control of the company to try and work out a way to save either the company or its business. If this is not possible, the Administrator aims to find a better return for creditors than if placed into liquidation. An option for the Company in administration is to execute a Deed of Company Arrangement (“DOCA”).
A successful DOCA can yield a positive outcome for all stakeholders and the public interest. As stated above, creditors can receive a better return than if placed into liquidation. Once the DOCA is finalised, the Director will receive full control of their Company.
Some other benefits of a successful DOCA include:
- Ability to offset trading losses against future profits;
- Continued employment; and
- The Company arrangements with its financiers and lessors may not be jeopardised.
Given the options and benefits to the public interest available through a VA, it will become more popular when looming trouble arises within Australian businesses.
If you would like to discuss the above in more detail, you are welcome to contact me on (02) 8075 1045, or email nbazzi@chifleyadvisory.com.au.
