To Trade Or Not To Trade

What external administrators consider when deciding whether to trade on a business

Worrells is often approached by insolvent companies hoping to restructure their affairs and avoid liquidation. Although Small Business Restructuring (SBR) has become a popular option for companies since its introduction in 2021, not every company is eligible due to the strict $1million of liabilities limit or having outstanding employee entitlements (commonly superannuation) that they cannot pay in order to qualify. Voluntary Administration (VA) is often the next-best alternative for insolvent companies that are ineligible for SBR.

Unlike SBR, VA results in the directors’ powers over the company ceasing, with the voluntary administrator taking control of the company’s assets, including its business. This means that one of the voluntary administrator’s first decisions on appointment is whether to trade on the company’s business during the VA. In making this decision, the voluntary administrator will