Voluntary Administration doesn’t have to be the answer if a company is in trouble
2 mins reading time
When a company goes into Voluntary Administration, there are many losers, not just creditors.
Shareholders lose the money they’ve invested, and the board members their reputation.
Directors know they are personally liable for any debts incurred whilst trading insolvent.
While the company might be solvent now, determining the point at which a company becomes insolvent is often difficult, even for seasoned professionals, and may explain why some boards preempt it.
Boards do have options. They can qualify for the Safe Harbour defence.
Boards simply need to be able to document their course, or courses of action, that are reasonably likely to lead to a better outcome for the company than the immediate appointment of an administrator or liquidator.
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Voluntary Administration doesn’t have to be the answer if a company is in trouble
When a company goes into Voluntary Administration, there are many losers, not just creditors.
Shareholders lose the money they’ve invested, and the board members their reputation.
Directors know they are personally liable for any debts incurred whilst trading insolvent.
While the company might be solvent now, determining the point at which a company becomes insolvent is often difficult, even for seasoned professionals, and may explain why some boards preempt it.
Boards do have options. They can qualify for the Safe Harbour defence.
Boards simply need to be able to document their course, or courses of action, that are reasonably likely to lead to a better outcome for the company than the immediate appointment of an administrator or liquidator.