During the moratorium period (usually around one month but can be extended) the voluntary administrators can undertake any tasks necessary to maximise the business potential and ultimately the return to all stakeholders of the company.
Voluntary administration is designed so that a company maintains the greatest chance possible of continuing to exist. Often a Voluntary Administration is a precursor to the company entering into an arrangement with creditors to pay debts, in the form of a proposed Deed of Company Arrangement. This is a cooperative approach whereby creditors agree to the arrangement rather than enforcing debt claims.
In any scenario the creditors of the company ultimately determine its future. Should creditors fail to accept a proposal for a Deed of Company Arrangement the remaining options are for the administration to end handing the company back to its directors or to place it into liquidation.
Deed of Company Arrangement
A deed of company arrangement (DOCA) creates a binding agreement between a company and its creditors as to how the company must manage its affairs.
A deed of company arrangement is one of the outcomes as a result of a company entering voluntary administration.
The goal of the deed of company arrangement is to provide the company with a manageable debt plan in the best interests of the stakeholders of the company and to avoid the necessity of the company going into liquidation. A deed of company arrangement usually offers a larger return to its creditors in respect of their outstanding debts than could be achieved from liquidating the company. It is common that upon entering a Deed of Company Arrangement that the control of the company reverts to its directors whilst the Deed Administrator administers the Deed and pays dividends to the proved creditors.
It is the responsibility of the deed administrator to ensure that a company adheres to the steps and agreements laid out in a deed of company arrangement. The deed administrator is usually the appointed voluntary administrator, subject to the resolution of the company’s creditors.
Our directors have had significant success as a result of their years of experience in administering companies resulting in successful deed of company arrangements with the company surviving and thriving into the future.
With over 100 years of combined experience our registered insolvency practitioners can provide you with the most appropriate solution for your circumstances. At Dye & Co. Pty Ltd the appointees work directly on every matter and you will have that person as your point of contact from start to finish.
What is the effect on Creditors of the company
Secured creditors are able to exercise their security for up to 13 days after a company enters voluntary administration. After that there is a moratorium for the duration of the administration.
Unsecured creditors cannot enforce any claims during a voluntary administration.
In addition during the period of voluntary administration the company is afforded protection from the finance company and landlords which can assist with ongoing trading requirements.
Debts incurred prior to the company entering voluntary administration will be subject to the terms of a deed of company arrangement.
Every deed of company arrangement is unique and will stipulate the terms and agreements for resolving creditor claims.
The deed of company arrangement will bind all creditors regardless of whether or not they voted to accept the deed of company arrangement or not.
Any debts incurred by a company after it has executed a deed of company arrangement from its ongoing trading are not subject to the terms of the deed and should be met in the ordinary course of the company’s ongoing trading.
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Getting advice as early as possible can put you in a much better position and provide some peace of mind. Get in touch to discuss your situation.