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Topic 8 - Receivership & Voluntary Administration (Wk 10) - Coggle…
Topic 8
- Receivership & Voluntary Administration (Wk 10)
Insolvency
Unable to pay debts as and when they fall due
s95A
Cash flow test
the courts ask whether the company has any money from any source to pay
Presumptions of insolvency s459C(2)
Courts test for insolvency
Receivership
When a company defaults on a loan, a secured creditor normally has the right to place the company into receivership
Appointment of a receiver:
by secured creditors (breach of loan)
by minority shareholders (oppression)
by ASIC (when investigating)
by court (just and convenient)
The creditor appoints a receiver to:
take possession of the secured asset
manage or sell the asset
repay the secured creditor
account to the company for any surplus
Bound by the same "officers" duties and owe duties to the company and creditor
s420A
Effects of receivership
Receivers powers
Duties of receivers
Other creditors rights
unsecured creditors must wait until secured creditors are paid
employees are treated as preferential creditors
Ending receivership
Voluntary Administration
Independent external person takes control of the company for a short period of time
Aims to maximise the chance the business will continue OR to maximise the return to creditors and members should the company be wound up
Administrator can be appointed by:
the company (if the board thinks the company is or soon will be insolvent)
s436A
the liquidator (if thinks the company is or soon will be insolvent)
s436B
secured party (if entitled to enforce security)
s436C
Outcomes
They review the affairs and offers three options to creditors:
agree to a deed of company arrangement
apply to wind up the company
return control to the board of directors
Effects of appointment of a voluntary administrator
Liability of a voluntary administrator
Creditors vote on the options by show of hands (unless a poll is demanded) and then the administrations ends
Deed of company arrangement (DOCA)
a statement of things the creditors have agreed on
binding on all creditors (secured only if the vote)