Glossary
Any property of value owned by a person. Can include tangible and intangible assets.
A small group of creditors, or their representatives, often appointed by the creditors of a company at the first meeting in a voluntary administration. The committee’s role is to consult with the voluntary administrator and to receive and consider reports by the voluntary administrator. The committee may be called upon to approve the voluntary administrator’s fees. The voluntary administrator must report to the committee when it reasonably requires.
A separate legal arrangement set up to deal with creditor claims. Creditor claims can be transferred to a creditors’ trust as part of a deed of company arrangement.
A liquidation for insolvent companies, initiated by the company. Creditors may replace the liquidator appointed by the company in this type of liquidation.
A person who owes a debt.
The external administrator appointed to oversee a deed of company arrangement.
a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with, which may be agreed to as a result of the company entering voluntary administration. Aims to maximise the chances of the company, or as much as possible of its business, continuing, or to provide a better return for creditors than an immediate winding up of the company, or both.
A natural person appointed as a director of a company who is then responsible for directing and managing the affairs of a company. Also includes a shadow director.
A creditor (including the Australian Taxation Office in respect of the superannuation guarantee charge) who, in a winding up of a company, would normally be paid their employment-related entitlements in priority to other unsecured debts. These creditors are given a special right to vote on a deed of company arrangement proposal that seeks to modify their priority.
a creditor who is entitled to have a say in a pooling determination made by a liquidator. The term generally covers the external unsecured creditors of the group, but excludes debts owing between companies in the pooled group. A pooling determination relates to a decision to treat the affairs of a group of companies as if it were a single external administration.
a general term for an external person formally appointed to a company or its property. Includes provisional liquidator, liquidator, voluntary administrator, deed administrator, controller, receiver, and receiver and manager. Other than a liquidator for a members’ voluntary liquidation and a controller who is not a receiver or receiver and manager, an external administrator is required to be registered by ASIC. An external administrator is sometimes also referred to as an insolvency practitioner.
The receivers, like TPH, are appointed by a secured creditor and the pre-pack transaction is implemented with the co-operation of the directors and other stake-holders. When conducting a sale of a company’s assets, receivers are required to observe a duty to obtain market value or else the best price obtainable in the circumstances. Secured creditors insist that the distressed company undertake its own sale process before implementing any restructuring plan in order to establish a benchmark value against which a pre-pack sale by a receiver could be measured.
A transaction where a company director transfers the assets of an insolvent company (A) into a new company (B) in which he or she is also company director or otherwise associated. The assets, if any, of the company A are undervalued to reduce the transfer amount to the new company B but the debts remain in the old company A. The director avoids paying trade debts, taxes and employee entitlements.
A restructure by way of a pre-pack transaction is particularly beneficial to those companies whose business relies heavily on key contracts or services. When key contracts are terminated, the value of the business may be immediately lost or substantially eroded. Ipso-facto clauses in key contracts provide the non-defaulting party with the opportunity to terminate the contract or otherwise use the default to leverage its position in relation to the on-trading of the distressed business.
The orderly winding up of a company’s affairs. It involves realising the company’s assets, cessation or sale of its operations, distributing the proceeds of realisation among its creditors and distributing any surplus among its shareholders. The three types of liquidation are: court, creditors’ voluntary and members’ voluntary.
A liquidation for solvent companies, initiated by the company.
A Members’ Voluntary Liquidation is the process for winding up a solvent company. A company is solvent if it can pay its debts within 12 months and is otherwise unable to be deregistered at the end of its life because it holds assets or liabilities of more than $1,000. The objectives of this process are to liquidate the assets of the company and after paying any creditors distribute the surplus assets to the shareholders. In some instances the assets can be distributed to shareholders in specie so as to avoid actually selling the assets.
A Members Voluntary Liquidation can provide a tax advantageous mechanism for distributing assets held by companies to the shareholders, particularly where the Company holds pre CGT assets.
TPH Advisory has undertaken many member’s voluntary liquidations. We have undertaken this type of appointment for all types of businesses from Family Private Companies to public entities and even charities such as Ian Thorpe’s Fountain of Youth.
An insolvency procedure where a receiver, or receiver and manager, is appointed over some or all of the company’s assets. Some of the technical aspects associated with a receivership appointment are: a Receiver generally has the power to continue to trade the operations of a business if it is commercially advantageous to do so. The Receiver’s primary role is to recover the secured creditor’s debt but otherwise needs to conduct a swift and practical investigation to enable a report as to whether any offences have been committed to be prepared for ASIC. Unfortunately a Receiver’s duties towards unsecured creditors are limited and a Receiver is not obliged to report to unsecured creditors, call a meeting or pay dividends for any debts incurred prior to the appointment.
From time to time a situation may arise that threatens the financial health of a business. Such a situation could be the loss of a major customer, increase in competition, increase in unit costs from a supplier or legal action threatened or commenced against the company. We, at TPH, believe early attention provides the best chances to remove any financial risk to the business. TPH provides companies with a Solvency Review to aid directors in their decisions to deal with the financial risk/s at hand. The review assesses the company’s current liquidity and the future financial impact the risk/s will likely have on the business.
An insolvency procedure where the directors of a financially troubled company or a secured creditor with a charge over most of the company’s assets appoint an external administrator called a ‘voluntary administrator’. The role of the voluntary administrator is to investigate the company’s affairs, to report to creditors and to recommend to creditors whether the company should enter into a deed of company arrangement, go into liquidation or be returned to the directors.