Corporate Insolvency Management

Receivership is triggered when a secured lender wants to recoup a debt, or when a key stakeholder (like an investor, director or shareholder) requests one from the Court. The Receiver takes charge of the company’s assets to distribute the funds to those that are legally due, although sometimes this action is taken simply to protect assets during a period of Court action. If there is a dispute, Court Appointed Receivers will be called in to help sort things out.

The Receivers and Managers will decide whether to keep trading, close down, or sell the business, all in the name of raising enough money to repay the debt to the initial secured creditor. They do not have to deal with any other creditors, or pay off any other debts from before the Receivership. If the debt remains unpaid, the Creditor can appeal directly to the court to have the Company put into liquidation.

If you or your client’s Company is facing receivership, get in touch and we’ll help to make the process as smooth as possible.

A Creditors Voluntary Liquidation (CVL) takes place when a Company can no longer repay its debts, so it’s members declare that it is, or will soon be, insolvent. The CVL provides an official framework for winding up a company, including investigating where things went wrong, and monetising company assets to repay Creditors. A Liquidator oversees the process; an independent third party to make sure that everything is done correctly and legally.

A CVL starts when the company’s members pass a resolution to do so, or if Creditors of a Company in Voluntary Administration decide that the Company should be wound up. A Company cannot decide to commence a CVL if it has an active winding up application against it.

If a CVL is on the cards for you or your client, as experts in the area we’d be happy to help you navigate the process.

Members Voluntary Liquidation (MVL) is a straightforward way to wind up a solvent Company that is no longer needed. This exercise helps to dismantle the company structure, finalise its affairs, distribute its assets to creditors and shareholders, pay off all debts, and avoid unnecessary tax in the process. This process can only proceed if a Company is still solvent but has, ideally, stopped all business.

The Directors of the Company have a lot of responsibilities in the lead up to and during the liquidation. These responsibilities may include:

• deciding which assets to sell and which to distribute as is (using market value for each)
• updating the franking account, to distribute left over credits as per other assets
• paying off all debts
• closing out all contracts,
• completing and lodging all business activity statements
• paying out all tax and cancelling GST registration
• closing out all statutory responsibilities (like WorkCover, Super, etc)
• accounting for all company reserves
• seeking a preliminary tax assessment of the liquidation from the company’s tax advisor
• in partnership with tax agent, preparation of all accounts and tax returns up to the date of the liquidation, including a balance sheet showing no liabilities (except any pending tax debt)

If your Company, or the Company of a client, is considering an MVL we can help. Let us know and we’ll help you get it right from the start.

Court Liquidation (CL) is when a Creditor (or group of creditors) asks the Court to wind-up a Company that owes them money. This process includes investigating what went wrong with the company, monetising and distributing the company’s assets to repay debts, with the final result being the winding up of the company. If a Creditor has tried many other approaches to get their money back without success, they can resort to Court Liquidation.

In order to start the process, the Creditor must send a Creditor’s Statutory Demand to the Company. If the Company has not applied for it to be “set aside”, or paid their debt by 21 days after the demand is issued, the Company is presumed insolvent. This is enough reason for a Creditor to make an application for the Company to wind up. They must serve the Company a copy of the Winding up Application, and at the hearing a final decision will be made.

We can offer assistance if you, or your client, are about to commence the CL process, to ensure that everything runs smoothly.

Voluntary administration is when the directors of a Company bring in an external administrator to help manage the company’s assets during a period of financial distress. The goal of this exercise is to maximise the company’s chance of survival, or to at least get a better financial outcome than winding up the Company immediately.

The administration process can be triggered by the directors if they decide that the Company is insolvent (or will be soon), or by a secured party who has security interest in company property. A voluntary administrator can still be appointed even if there is an active winding up application again the Company in the Court.

The whole process usually lasts around 25 to 30 business days.

If Voluntary Administration is on the cards for you or your client, get in touch and we’ll help make it as painless as possible for you.

A Deed of Company Arrangement (DOCA) is an agreement between a Company and their Creditors, which protects both parties, and details how, when and how much of the debts will be repaid. The Voluntary Administrator must propose the DOCA by showing that the Creditors would be better off under the arrangement. If 50% of the Creditors agree, the Company signs it, as does the Deed Administrator, who then ensures that it is carried out correctly.

DOCA proposals can come in many shapes and sizes. The Administrator may propose a large, one-off payment by a director to settle all claims, or perhaps recouping some of the debts through the sale of assets. They may even offer a payment plan spaced over a period of time, to be paid for by continued business activities.

To find out how we can help with you or your clients DOCA, get in touch.