Corporate Insolvency


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Voluntary Administration

Where there is a prospect of all or part of the business resolving its debts and trading on, this process allows Director/s, secured creditor/s, or a Provisional Liquidator to appoint an independent insolvency practitioner to assume control of the business during an investigation period of usually 28 days. At the end of that time, the Administrator makes a recommendation about the future of the business to its creditors, the majority of whom must agree with the recommendation in order for it to be effected. The options include selling the business as a going concern; realising the assets and winding up the company; or implementing a Deed of Company Arrangement which would allow the company to be returned to the control of its Director’s under terms agreed by the creditors.

Receivership

The appointment of a Receiver is effected by a secured creditor (usually a Bank) under the provisions of a valid charge document, where the debenture contains powers to appoint a Receiver. The Receiver may realise all or some of the company’s assets in order to recover funds owed to the secured creditor; alternatively find some other means of settling the debt and continuing to trade the business.

Creditors Voluntary Liquidation

If a meeting of creditors in a Voluntary Administration votes to wind up the company, the Administrator becomes the Liquidator, and the process is called Creditors Voluntary Liquidation. This generally occurs when a proposed Deed of Company Arrangement has failed to meet with creditor acceptance. Alternatively, Directors/shareholders who no longer wish to continue trading may appoint a Liquidator directly, without going through the Voluntary Administration process.

Members Voluntary Liquidation

This is a quick and streamlined process to realise the assets of a solvent company, once its shareholders have decided to dissolve it. Once appointed by shareholders, the Liquidator distributes the assets. Tax benefits may apply to distributions made under this arrangement.

Official Liquidation

Otherwise described as a court liquidation, a restricted list of senior insolvency practitioners are approved as Officers of the Supreme Court, and registered by ASIC as Official Liquidators. They may be appointed by the Court to manage a liquidation according to the requirements of the Corporations Act, as a result of an unsecured creditor applying to have a defaulting debtor company wound up. The Official Liquidator takes control of the company’s assets and realises them so as to provide the best possible return to creditors. The Official Liquidator must also fully investigate the financial affairs of the entity and its Director/s to determine if grounds exist for legal recovery action. Antony de Vries is an Official Liquidator with among the greatest amount of experience in these transactions of any current practitioner in NSW. Riad Tayeh and David Solomons are also Official Liquidators.

Deed of Company Arrangement

A ratification by creditors of a proposal made by company Director/s during a voluntary administration, the Deed is a legally binding document between the Administrator, the creditors and the Director/s. For the agreed period, the Administrator must continue to monitor the fulfilment of the Deed’s conditions. This process is used when the outcome gives a greater return to creditors than would have been achieved through a liquidation.

Receiver and Manager

The historical distinction between a Receiver and Manager, and an appointment as Receiver only, was that the former held powers to trade on the company as a going concern in order to maximise realisations to the secured creditor. In practice, unless the debenture specifically declines the capacity, the term Receiver now generally also empowers the management of the company’s business activities.

Agent for Mortgagee

This type of appointment is usually made by a secured creditor after they have gained control of a property subject to a debenture. The mortgagee is able to direct their appointed agent to a greater degree than is possible under a Receivership, with the usual purpose of managing the property and realising the asset.