Essay on corporation law case report

Submitted By YqcythiaC
Words: 989
Pages: 4

My advice for Golden Motors is to go into voluntary administration since Golden Motors is now in financial difficulties-ongoing losses. (The directors can rely on s95A and cash flow test to determine the solvency of the company)

This can protect the directors from insolvent trading under s588G. Contravening the insolvent trading can result in civil penalties including pecuniary of up to $200,000 or criminal charges (a fine up to $220,000 or imprisonment for up to 5 years or both).
It maximizes the chances of company of its business continuing in existence and results in a better return for creditors and members than would result from immediate winding up: s435A THE PROCESS OF VOLUNTARY ADMINISTRATION
An overview of the process of a voluntary administration shows as follows:
Appointment of administrator
(a) Appointment. The administrator may be appointed by the company (s436A), a liquidator or provisional liquidator (s436B) or a secured creditor (s436C). Thus, the directors of Golden Motors have the right to appoint the administrator through a resolution at this stage based on the financial difficulties. However, the directors who vote in favor of this resolution must have formed the opinion that the company is insolvent or likely to be insolvent: s436A. Also, the directors should notice that only someone who has been registered by ASIC as a liquidator can be appointed: s448B. This person must also be independent of the company.
(b) Powers and liabilities of the administrator. An administrator has control of the company (s437B) including: to carry on, terminate or sell the business; to sell the company’s property; to remove and appoint directors; to do anything in the company’s name; to do whatever else is necessary for the purpose of VA provisions: s437A and 442A. Meanwhile, he or she has some obligations. For example, an administrator is an officer of the company and is in a fiduciary relationship with the company. Also, the administrator is personally liable on the contracts which he or she enters into and has a right of indemnity out of the company’s assets: s443A and s 443D. In addition, the administrator has liability arising from leases. He or she has 7 days to give the lessor notice that the company does not propose to occupy the property. If fails, he or she could become personally liable from 5 business days after the start of administration: s443B. Also, the administrator has a right of indemnity out of the company’s assets for this liability: s443D.
The first meeting of creditors
After appointment of the administrator, the first meeting of creditors must hold within 8 business days. On the meeting, creditors have the opportunity to replace the administrator and decide whether to appoint a committee of creditors: s436E. If the creditors’ committee is appointed, it has the power to consult with the administrator and receive and consider reports by the administrator: s436E.
Investigate company’s affairs: s 438A
At this stage, one important thing for the administrator to do is make an estimate of the possible amount of the money under the voidable transactions provisions if the company were to be wound up.
The second meeting of creditors
The meeting must hold 20 business days of the administration beginning. During the meeting, administrator must send the creditors a report of the company’s affairs and a recommendation about how creditors’ interest would best be served: s439A. Creditors will vote to decide whether the company is solvent to trade on or is insolvent to liquid or need to enter deeds of company arrangement that makes administrator continue to manage the company up to 2 years to help the company reverse.

Company is in a kind of safety zone. Legal proceedings and proceedings which have already been commenced cannot be started unless the administrator or the court agrees: ss440D and