06 Jun Can a Company be in Liquidation and Voluntary Administration at the same time?
For the impatient ones among us, the short answer is Yes!
Stimpson was recently appointed Liquidator of a company on the application of a major creditor in the Supreme Court of Qld.
After making some enquiries, it became apparent the company was trading, so we grabbed the Sealed Order and headed out to the premises.
We urgently reviewed the business and decided to continue trading. As the business was a manufacturer, this triggered a whole bunch of problematic issues:
- How do we keep employees, suppliers and customers calm?
- As some of the current customer orders were over 3 to 6 months, we had to consider whether customers would withdraw their orders.
- Materials were required (some from overseas); could we get supply on credit, or at all?
- Some pre-appointment restructuring had occurred; were they in the best interests of creditors?
- Financiers, landlords and senior management of the business were all a bit tetchy.
And in amongst all this was a feud between two related party creditors, one wanting to save the business, the other wanting to bury it.
We concluded that the operational issues could be overcome and the business could trade profitably. We also believed that a Deed of Company Arrangement (DOCA) was possible from at least one of the related party creditors, or a sale of the business could occur.
This however would take time and the Corporations Act is not fond of allowing Liquidators time for prolonged trading. So, we called a meeting of creditors who resolved to appoint Stimpson to act concurrently as Voluntary Administrator (VA) and Liquidator.
To cut a long and convoluted story short, we brokered a deal between the two warring related party creditors, who relinquished their shares and resigned their Directorships to an incoming unrelated ‘White Knight’ who in turn put forward a DOCA proposal to deal with all unrelated debt, including employees and financiers.
The creditors voted unanimously for the DOCA, which has now been executed, the business transitioned and payments made to the DOCA Fund.
The final chapter to the story is that the Liquidation will soon be terminated by Court Order, the DOCA will in due course be effectuated and all customers, creditors and employees will live happily ever after…..or so we hope.
This is an ‘old school’ example of how a VA can save a business and satisfy creditors’ claims. No pre-insolvency advisor, no pre-pack. Just good old insolvency know-how and stakeholder co-operation.
If you would like further details regarding these examples, please contact SV Partners. If you or one of your clients require assistance with any Bankruptcy related matters, please contact your local SV Partners office 1800 246 801.