Voluntary administration

Voluntary administration

Save your business with voluntary administration

The primary purpose of voluntary administrations is to give insolvent companies a legal process so they can continue in existence. It’s an alternative to the liquidation of the company.

Signs that your company have a solvency problem include:

  • When you are spending more time "firefighting" than running the business
  • Cashflow problems
  • Problems paying Inland Revenue
  • Difficulty with paying employees
  • Overdue debtors
  • Regularly negotiating deferrals and special repayment arrangements with creditors
  • Formal demands for payment from creditors
  • Liabilities exceed assets

Buy time with voluntary administration

The first reaction to business trouble is often to ignore it, but avoiding calls from your creditors or injecting your own money into a failing business is not the best long-term solution. There are a number of restructuring options, such as voluntary administration, that may enable the business to survive and avoid liquidation. The directors of a company can appoint an independent administrator who will suggest a recovery plan for creditors to consider.

Why voluntary administration?

Choosing voluntary administration provides the following benefits:

  • It provides a business with breathing room to restructure and survive
  • It can prevent creditors from taking action, such as Court proceedings, enforcing securities and taking possession of property, or making demands under a personal guarantee
  • It may provide a better return for creditors and owners than they would receive from an immediate liquidation
  • It can protect directors from personal liability for continued trade

How long does voluntary administration last in New Zealand?

A voluntary administration usually goes for 30-40 days.

What are your responsibilities as a company director?

If your company trades while insolvent, as a director you can be held personally responsible for the business's liabilities. Taking a proactive approach, such as voluntary administration or liquidation, lowers the likelihood of legal action being brought against you for a breach of your duties as a director.

A creditor compromise often allows a company to cover short-term debt with long-term debt, providing a cash flow improvement. It requires creditor approval and our specialist team can guide you through this process.

For more information, contact one of our experts now.

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