Restructuring
A voluntary administration process (also known as a VA), is a mechanism to allow for an independent person (an administrator) to take control of a company’s affairs and to assess its viability. The administrator is also a registered liquidator.
The objective of the VA is to provide for the company’s business, property and affairs to be administered in a way that:
- maximises the changes of the company, or as much as possible of its business continuing in existence; or
- if it is not possible for the company or its business to continue in existence, results in a better return for the Company’s creditors than would result from an immediate winding up (i.e. liquidation) of the company.
The VA commences when an administrator is appointed by the company’s directors at a directors meeting, whereby the directors have formed the opinion that the company is insolvent, or likely to be insolvent.
During the administration period, creditors’ claims are put on hold and is known as a “moratorium period” which prevents creditors from taking enforcement action against the company. This allows the company breathing space whilst the company’s future is being resolved. Except in limited circumstances, secured creditors cannot continue their security interests in the company’s assets.
The administrator investigates and reports to creditors about the company’s business, property affairs and financial circumstances. The administrator is also required to provide creditors with information and recommendations to assist creditors to decide upon the company’s future.
The company’s future is decided at the second meeting of creditors which the administrator must hold, and creditors must vote and approve one of the following outcomes:
- That the administration ends, and control of the company returns to the directors;
- That the company is wound up by creditors’ voluntary liquidation; or
- That it enters into a Deed of Company Arrangement (DOCA)
For more information on Voluntary Administration, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
A Deed of Company Arrangement (also known as a DOCA) is binding agreement between a company and its creditors, setting out how its affairs will be dealt with.
The purpose of a DOCA is to maximise the chances of a company, or as much as possible of its business, continuing and to provide a better return to creditors than the immediate winding up of a company (being placed into liquidation).
The DOCA is typically proposed by a director of a company and / or any third party.
The DOCA must be approved by creditors at the second meeting of creditors in the voluntary administration and the deed must be signed by all parties within 15 business days from the creditors meeting.
Upon execution of the deed, the administrator generally becomes the deed administrator.
The deed administrator will monitor the DOCA. The terms of the DOCA vary but key terms include things such as payment plans and how creditors will be paid, that the company must comply with ongoing taxation, fiduciary and statutory requirements and to some extent the deed administrator’s role during the DOCA.
For more information on Deed of Company Arrangement, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
The process of revamping several aspects of the company to respond to changes after the financial crisis, achieve sustainability or enhance the performance of the organisation is termed as small business restructuring. An insolvent company has 20 days to develop a recovery plan, following which creditors vote on whether or not to approve it for the restructuring services.
The reasons for business debt restructuring can be a financial crisis and lack of resources but the outcome can be profitable and efficient for the company. It includes:
- inability to repay the debts
- unable to overcome start-up expenses or unexpected costs
- the costs involved with over-expansion
- investment in the expansion in unprofitable locations
- conflicts or loss of clients
- the sudden downfall of the revenue acquired
Small company restructures rollover requires small companies to move existing assets from one person to one or more other entities without risking an income tax obligation.
The procedure is divided into four stages:
Stage 1- The eligibility criteria include the operation of the business as a company with less than $1 million liabilities.
Stage 2- The company must appoint a restructuring practitioner within 20 business days for document filing.
Stage 3- The creditors have a duration of 15 business days to review the document and give a final verdict.
Stage 4- The final step is for the company to abide by the procedure as mentioned in the document.
Due to the small business restructuring, the company can observe a fall in operational costs and development in productivity and operational efficiency. The company restructuring can also cause loss of skilled labour, lack of productivity, and poor knowledge of the innovations.
For more information on Small Business Restructuring, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
Insolvency
A creditors voluntary liquidation (also known as a CVL), is a type of liquidation that is initiated by the company’s members (shareholders) at a members meeting. The members must resolve that the company is insolvent and is unable to pay all of its creditors’ debts as and when they fall due. The members will appoint a registered liquidator to assist to facilitate the CVL and to take control of the company’s affairs. This type of insolvency appointment allows for the winding up of a company without the need of Court intervention.
The liquidator’s role in a CVL is to wind up the company’s affairs in an orderly manner and to the benefit of all creditors. The liquidator’s role also includes:
- to protect, recover and sell any available assets;
- to investigate the company affairs and report their findings to creditors;
- to report to the Australian Securities and Investments Commission (ASIC); and
- to distribute the available funds to creditors.
For more information on a Creditors’ Voluntary Liquidation, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
A simplified liquidation process is a streamlined creditors’ voluntary liquidation process intended to be more cost effective due to reduced investigations, reporting and distributions requirements, however the liquidation process remains the same. It came into effect on 1 January 2021.
What are the eligibility criteria?
To be eligible the company must:
- Be unable to pay its debts in full within 12 months;
- Have no more than $1 million in liabilities;
- Be up to date with lodgement of all returns, notices, statements applications, and other documents required under the Income Tax Assessment Act 1997;
- Have not undergone restructuring or been subject to a simplified liquidation process within the past seven (7) years; and
- Have no current or recent directors of the company that have also been a director of a company that has been under restructuring or subject to a simplified liquidation process within the past seven (7) years.
Company’s members (shareholders) hold a general meeting and must pass a resolution for voluntary winding up the company. The director(s) must, within five (5) business days after the resolution has been passed, give to the liquidator:
- A report on the Company’s business affairs; and
- A declaration that they believe, on reasonable grounds, the company meets the eligibility criteria for the simplified liquidation will be met.
How the process is adopted?
The liquidator in the creditors voluntary winding up may adopt the simplified liquidation process if:
- They believe on reasonable grounds the eligibility criteria are met;
- Not more than 20 business days have passed since a liquidator was first appointed in the creditors voluntary winding up; and
- The liquidator has given each creditor and member at least 10 business days’ notice of their intention to adopt a simplified process.
There is no guarantee that a simplified liquidation will be possible, and a liquidator is unable to adopt a simplified liquidation process if at least 25% in value of unrelated creditors request the liquidator not to follow the process.
When must a liquidator cease to follow the simplified liquidation process?
The liquidator must cease to follow the simplified process if:
- The eligibility criteria are no longer met; and
- The liquidator believes on reasonable grounds that the company or a director has engaged in conduct involving fraud or dishonesty which has, or is likely to have, a material adverse effect on the interests of all, or a class of creditors.
How is the simplified liquidation process different to a full creditors’ voluntary winding up?
- Meeting of creditors are not held. Matters are determined by creditors are decided via “proposal without a meeting” process. Creditors retain the right to request reasonable information from the liquidator.
- Creditors cannot form a committee of inspection.
- Reports to creditors are streamlined.
- Modified recovery of unfair preferences from unrelated creditors.
- Modified reporting to ASIC on possible director offences.
- Modified dividend requirements, including only one dividend paid.
For more information on a simplified liquidation process, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
A court liquidation is a type of liquidation where an order is made by a Court to wind up a company and a liquidator is appointed to take control of the company’s affairs. An application to the court can be made by a creditor, a director, a shareholder or ASIC.
The liquidator’s role in the court liquidation is to wind up the company’s affairs in an orderly manner and to the benefit of all creditors. The liquidator’s role also includes:
- to protect, recover and sell any available assets;
- to investigate the company affairs and report their findings to creditors;
- to report to the Australian Securities and Investments Commission (ASIC); and
- to distribute the available funds to creditors.
For more information on a court liquidations, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
A members voluntary liquidation (also known as an MVL), is a process where a solvent company is wound up and has sufficient assets to pay its creditors in full with any surplus assets being distributed to its members (shareholders).
Some reasons why shareholders may choose to wind up a solvent company:
- The company has reached the end of its life.
- Its business has been sold.
- Directors and shareholders retiring.
To initiate an MVL, the company’s’ directors must sign a Form 520 – Declaration of Solvency statement that the company can pay its debts in full within 12 months of the commencement of the MVL. The directors will convene a meeting of directors where the statement is executed and is then lodged with ASIC. The next step involves the company’s shareholders convening a meeting of members where the company is placed into liquidation and a liquidator is appointed to take control of the company’s affairs.
There may be some instances during an MVL where it turns out that a company is unable to pay its debts in full within 12 months of the commencement of the MVL. The liquidator has a duty where the company turns out be insolvent and must do one of the following as soon as practicable:
- Apply to Court for the company to be wound up in insolvency;
- Appoint a voluntary administrator; or
- Convene a meeting of company creditors to place the company into a creditors’ voluntary liquidation.
For more information on a Members’ Voluntary Liquidation, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
Receivership
A receiver is appointed by a secured creditor or in special circumstances by the court, to take control of some or all of a company’s assets.
A secured creditor appoints a receiver because the company owes money and it has failed to pay its debt. A court appointed receivership occurs when there may be disputes or disagreements between the parties involved in the business.
A receivership does not necessarily mean that the company’s business has failed, or the corporation has come to an end.
The receiver’s role also includes:
- To carry on any business of the corporation.
- To realise the secured assets and pay out the secured creditor’s debt;
- To pay out money as required by law or the Corporations Act 2001; and
- To report to ASIC any possible offences.
For more information on Receivership, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
Independent Directorship
Independent directorship is primarily a situation in which a corporation takes in board of directors (BoD) members from outside to offer fresh experiences and new insights.
The Companies Act of 1956 created distinct criteria for companies to have an Independent Director. Any listed public corporation must have at least one-third of its autonomous directors.
Since the members are new to the business, it is expected that their experiences will be a benefit for the company but still retaining a balance. It brings in unique skills from their industry or personal background with the company’s wellness and operations.
Many of the fundamental flaws and misleading statements that were happening and permitted to repeat within the organisation were obscured by a lack of outside perspective and transparency, according to the consensus.
Independent directors serve as advisors to the group, with a primary emphasis on good governance. They focus on strengthening corporate credibility and governance practices, looking out for the functioning of the company, and playing an active role in financial planning.
Role of an Independent Director
An independent director serves as a guiding light, focusing on increasing organisational reputation.
Some of the important roles performed by them are:
- reduces the pressure of the owners of an organisation and brings an objective opinion to the table.
- facilitate the board’s deliberations by bringing impartial judgment on matters like policy-making, risk control, key assignments, or behavior standards.
- evaluates and observes the company’s performance based on the decided targets.
- balance and protect the interests of the stakeholders
An independent director is appointed to ensure functional and adequate vigilance in the company.
For more information on Independent Director, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
Debt Settlement Arrangements
Debt consolidation is the process of taking out a new loan to pay down other creditors and consumer debts. The service involves various debts combined as a single and larger debt termed as loans with more attractive payoff conditions, such as a reduced interest rate, a lower minimum cost, or both.
Debt consolidation loans from lending sources are a common way out for consumers to clear their outstanding debt through bigger loans. Consolidating debt results in a regular annual bill that is frequently at a reduced interest rate and is easier to handle.
Independent directors serve as advisors to the group, with a primary emphasis on good governance. They focus on strengthening corporate credibility and governance practices, looking out for the functioning of the company, and playing an active role in financial planning.
Debt consolidation loans provide two options for the customers:
- Secured loans include the usage of property as collateral and provide loan at a lower interest rate but if the customer fails to settle the debt
- An unsecured loan doesn’t require some mortgage to assure monthly payments but requires a high credit score which is quite difficult in the case of a person dealing with debts.
Wonder how to get rid of debt?
If you don’t want to fall into the trap of bills and mortgage due to excessive spending, it is better to reduce or even eliminate debts.
- Try to avoid falling into debt by consolidating debt by taking a break from your credit cards or even restricting your spending.
- Maintaining a savings account or building an emergency fund that stops you from reaching for your credit card.
- The more you spend per time, the fewer days you have to pay, resulting in a lower outstanding balance and a lower interest rate.
It is preferable for those who are dealing with big loans who are trying to consolidate their debts to let their cash flow meet payments on a regular basis or opt for debt resolution. Debt resolution, also known as debt settlement, is the method of bargaining with your creditors on your behalf to convince them to compensate, settle, or consider a lesser bid than you owe.
Want to know how to negotiate your debt?
It is beneficial for consumers to talk with debt negotiators to discuss revised payments that would result in manageable regular payments or even full debt settlement.
If you begin with a lower bid, the creditor would almost definitely counter, increasing the price. With an assertive characteristic and general strategy for negotiation, it is easier to walk through small business debt settlement.
Debt relief assistance can lower your credit score, but it will keep you out of bankruptcy and allow you the opportunity to begin restoring your finances.
For more information on Debt Settlement Arrangements, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.
Bankruptcy Advice
Bankruptcy is a legal case in which a person or business is unable to recover its unpaid debts. The bankruptcy procedure is often initiated by a petition filed by the defendant or, in exceptional cases, on behalf of creditors, and that leads to the assessment of the debtor’s funds.
The declaration of bankruptcy in Australia can benefit the whole economy by providing people and companies with a second chance to receive loans and by providing creditors with a portion of debt redemption and relieving them of the legal obligation, but it reduces the credit score.
Wonder why bankruptcy occurs?
Companies that have been losing money for a long time use bankruptcy as a last resort. Consumer spending and consumption tend to fall during recessions, which can lead to low sales. Poor economic conditions stand out as a significant cause of large losses. The lender can hesitate to invest and provide additional financing if he sees the company struggling. Lack of strategy and foresight can lead to rash decisions and business loss.
Consequences of Bankruptcy in Australia
Though bankruptcy allows reviving the losses it also involves major losses and effects on the credit score.
- Bankruptcy does not delete the history of your previous debts; instead, lenders mark you as a reckless creditor, and it lowers a person’s credit score.
- It allows the public to have access to all of your records, including personal information of financial statements.
- People who file bankruptcy will lose property to the trustee, but if they successfully discharge the property, the trustee may be unable to sell it.
We know Bankruptcy may bring a lot of stress on your plate but Ticcidew is here to provide you solutions and we believe, the best way out of it is to start building a fresh financial future.
For more information on Bankruptcy Advice, please contact our friendly team on (08) 6228 1700 or by email at admin@ticcidew.com.au for a free, no obligation consultation.