Expectations from model law require the people involved to make it successful. Typically, model law enables and seeks to provide a good mix between the perception of what lawmakers would like to see occur and the skills of the person striving to achieve the outcome desired by the appointer.
There is no just-add-water framework able to be devised in a legal framework. Human interaction is required to provide the light and colour behind the lawmakers’ endeavours that are sought to be achieved.
There are more skills required when attempting to turnaround a failing business than in any other commercial circumstance. Lack of resources, broken connections and thwarted goals are the normal landscape for the Practitioner engaged and from this canvas, a revitalised and viable business is to be remade.
The objective of the Voluntary Administration model is defined as being able to see whether, or not, the Company, or the business, can continue in existence. The framework is comprised of four entwined dynamics:
- The assigning of power and control to an independent Administrator
- The existence of a moratorium, preventing the withdrawing of property and termination of contracts (does not apply to some secured creditors)
- The requirement of the Administrator to investigate, report and recommend
- The devolving of the ultimate decision of the Companies future to the Creditors by means of voting within a meeting of the general body of creditors
All this is to be achieved in 25 working days. Day one is the date of appointment and day 20 is the date on which the Administrator’s report is to be provided to creditors. The report provides information material to creditors so they can make an informed decision about the future of the Company. The Administrator is required to provide an opinion on those same facts and to make a recommendation regarding the company and its future. The recommendation is framed by the resolution that creditors will consider in general meeting. These later steps are to take place in the Watershed Meeting that is required to take place no later than day 25 from the commencement of the Administration.
Court extensions and adjournments can add further time to the process, but even if that does occur it will be time limited and not really change the fact that the Voluntary Administration is a pressure cooker event designed to provide some breathing space so that options can be considered, and a decision made in respect of the proposal.
Amidst the turmoil that results from a formal state of insolvency, the Administrator adopts the obligation to hold the form and shape of the business, preserve its inherent value, consider elements of viability, conduct formal processes and report to creditors in a way that enables a decision to be made. It’s a short and focussed process with the single-minded objective of preventing the demise of the business - and that’s a far better outcome than the misery of liquidation will ever be.
VOLUNTARY ADMINISTRATION IS THE LEGAL ALTERNATIVE TO LIQUIDATION.