The Australian business sector has taken a large fall in 2015, with a multitude of names having already entered into voluntary administration or liquidation following significant declines in solvency.
Among these are Sydney’s iconic Hugo’s Lounge, La Cita Latin Restaurant and Bar, SOHO and The Flinders Hotel, who earlier this year attributed their closures to the ramifications of the Australian government’s lockout laws. Various small to medium Australian businesses are also feeling the pressure after internal financial influences found them in severe business debt.
For the opportunities they present to company directors, Voluntary Administration and Voluntary Liquidation are among the most common and preferred business debt solutions available to Australian businesses experiencing financial distress.
Voluntary Administration is one of the most beneficial business debt solutions for companies experiencing lower levels of insolvency. Whilst a 25.7% rise in voluntary administrations between the March 2014/15 quarters demonstrates the increasing struggle of Australian businesses, it also highlights its preference as a means of avoiding liquidation. Under voluntary administration, insolvent businesses are given the opportunity to re-evaluate their financial affairs and make necessary structural changes to improve their chances of survival, all whilst continuing to trade. After this stage, company directors and their creditors make the decision to either maintain operations or fall back on liquidation. Australian fashion label Josh Goot and iconic Australian fast-food retailer Pie Face are among the big name businesses who were able to successfully emerge from voluntary administration in 2015.
As company liquidation involves officially ceasing the company’s operations, this business debt solution is often the last resort for insolvent companies. As part of the liquidation process, any remaining company assets are legally sold off and accumulated funds are distributed to pay liquidator costs and expenses, followed by the company’s creditors. The number of voluntary liquidation cases has increased by over 8% since the 2014 March quarter, showing that many company directors are recognising the benefits of admitting themselves into liquidation rather than being forced by court order. These include avoiding the stress of court appearances, being given the opportunity to assign a liquidator of your own choice, avoiding personal liability charges, and a faster and more efficient process.
If your business is experiencing financial distress and you would like to discuss the benefits and consequences of each of our available business debt solutions, give us a call on 1800 003 883.
We operate a 24/7 hotline so that you can receive information and advice on voluntary administration and liquidation whenever you need it most.