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    Question;4

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    Lubaba Jabin
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    Question;4

    Uploaded by

    Lubaba Jabin
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    course project

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    course project

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    2 views2 pages

    Question;4

    Uploaded by

    Lubaba Jabin
    course project

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 2

    Questions 4.

    Jack is a secured creditor of Bad Loans Ltd. Jack has just received a notification
    that Bad Loans Ltd has appointed a voluntary administrator. Jack has no clue what
    this means for him. Advise Jack on the following:

    (a) What it means when a company appoints a voluntary


    administrator.
    (b) Whether Jack can enforce his security interest.
    (c) What is the procedure for a voluntary administration (i.e., are
    there meetings and what happens at these meetings?).
    (d) What are the possible outcomes of a voluntary administration?

    Answer:

    Jack is a secured creditor of Bad Loans Ltd. Jack has just received a notification that Bad Loans Ltd
    has appointed a voluntary administrator. Jack has no clue what this means for him. Advise Jack on
    the following:

    (a) What it means when a company appoints a voluntary administrator; Voluntary administration is
    a way for an insolvent company to have a moratorium or safety zone from creditors’ claims while a
    decision is made about its future. It involves the appointment of a voluntary administrator. Section
    435A sets out the goals of the voluntary administration to maximise the chances that a company in
    difficulty will trade out, or otherwise to maximise the return for its stakeholders. During the
    voluntary administration the effects of the administration include, company directors losing their
    right to exercise officers’ powers of the company, the administrator becoming the only one who
    can deal with company property, proceedings against the company not allowed to commence or
    proceeded with except with leave of the court, director’s guarantees not being allowed to be
    enforced except with leave of the court, and special rules applying in relation to enforcement of
    security interests by secured creditors

    (b) Whether Jack can enforce his security interest;

    Whether Jack can enforce his security will depend on the extent of the company’s assets effected
    by Jack’s security interest.

    Pursuant to the Corporations Act 2001 (Cth) section 441A a secured creditor holding a security
    interest over substantial assets of the company can enforce their security interest within 13 days
    after notice of the Voluntary Administrator’s appointment is given. Other secured creditors must
    wait until the company is out of administration, Corporations Act 2001 (Cth) sections 440B and
    441B unless they obtain a court order.

    (c) What is the procedure for a voluntary administration (i.e. are there meetings and what happens
    at these meetings); and Pursuant to the Corporations Act 2001 (Cth) section 436E(2) the
    administrator must hold a meeting of creditors within 8 business days of the administration
    commencing and pursuant to the Corporations Act 2001 (Cth) section 439A the administrator must
    report back to a second meeting of creditors within 20 to 25 days.
    (d) What are the possible outcomes of a voluntary administration?

    At the second meeting of creditors the creditors will vote on three options namely:

    1. Agree to enter into a deed of company arrangement (typical clauses in a deed of arrangement
    include: an extinguishment of some, a proportion of, or all of the company’s debts; restricting the
    power of directors; and an order for priority of payments of the company’s debts.

    2. Agree to have the company wound up.

    3. Return control to its board of directors

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