Facing financial distress is a troubling time for any company. It is important to remember that even through these difficult and distressing times, the company could still be salvageable. One way to took to the future of the company and attempt to save it is voluntary administration. This is a process where a company can work to resolve financial issues and find their footing once more. Principle Insolvency is here to talk about voluntary administration and what the steps look like to complete this process.
Understanding Voluntary Administration
Under the Companies Act 1993 is the formal process known as voluntary administration. This is when an independent administrator is appointed to take a deep dive into the company’s financial affairs. Through this process, they are then able to assess whether or not the company is still viable. If it is, they will offer a recommendation for the right course of action to save the company. This can often provide a better outcome for creditors than the liquidation process. That is the goal, anyway.
Steps Involved in Voluntary Administration
The voluntary administration process is a legally binding one. The appointment must be in writing with the date of the appointment, and it can’t happen if the company is already in liquidation. Here are the complete steps of the process:
– Passed Resolution by Board of Directors: For the ball to get rolling, the board of directors must acknowledge and agree that the company is insolvent or headed in that direction. They must also appoint an insolvency practitioner or administrator. This appointment has to be in writing and submitted to the Companies Office right away.
– Administrator Control: Once the board of directors has appointment an administrator, that administrator will take control of the company’s daily operations. They will have several responsibilities that include investigating financial affairs, engaging with creditors and stakeholders, and preparing reports and making recommendations. On the Companies Register, the company’s status will also change to “in voluntary administration.”
– Creditor’s Meetings: There are two meetings that will be held during this part of the process, the first creditor’s meeting and a watershed meeting. The first creditor’s meeting will be held within 8 business days, and at this point the creditors may form a committee and confirm the administrator. The watershed meeting happens within 25 business days and is where the creditors vote on the future of the company. The result of these meetings will help determine whether or not the company needs to enter liquidation or not.
Insolvency Services in Auckland, Hamilton, Levin & New Zealand Wide
If you have a company that is in trouble, it is time to make a move. You can turn to Principle Insolvency to help. If voluntary administration is the right call, we will walk you through the process and work to help you save your company. If you are past that point, we will handle the liquidation process as well. Call us today!