voluntary administration process, page-2

What are the possible outcomes form the voluntary administration process?

The company’s destiny is in the hands of the creditors. The administrator recommends the course, however, the creditors are the body with the ultimate power to vote the resolutions at the meeting. There are three possible outcomes that the creditors can resolve:

1. The company can be returned to the directors – however, this rarely occurs in practice and generally would only be if for some reason the company was solvent. (Reason Directors Resigned)
2. The second is liquidation. If the company is insolvent and there’s no other option, or if there is a deed, but it does not provide for a superior return than liquidation, companies will often go into liquidation.
3. The third possible outcome is a Deed Of Company Arrangement (DOCA). A DOCA is a compromise of the debts due by the company. It is a very flexible arrangement, and as a result, the possible arrangements put forward are many and varied. For example, the following types have been regularly used in practice:

• Payment of a lump sum to meet all debts due
• Payment of a series of instalments
• Trading and paying either instalments from profits or a lump sum from final sale
• The sale of an asset and payment of proceeds (which may not be known)
• DOCA’s have also been used to re-list insolvent companies on the ASX.