Reading time: 3 minutes

An extraordinarily high number of businesses fail, and if yours has as well – we are sorry to hear that, losing your business can be a very painful process. The following are your options when your business fails.

Can you trade your way out of it?

Try and strike a deal with your creditors if you can.  Things may not be as dire as you think.

If that doesn’t work …

Then you should seek professional advice – don’t delay in making a decision.  If it becomes clear things are going from bad to awful, then stop trading and speak to a professional.

Trying to save your business is certainly better, but this may involve stopping trading until things get cleared up.  Of course stopping trading doesn’t mean you are winding-up the business, it just means you are taking time to try to work out the best solution.

There are a number of steps you can take if it appears you are heading towards insolvency, so you can relieve pressure from your creditors. You may need to:

  • Reorganise your business
  • Sell some assets
  • Reduce your costs
  • Put more energy into the areas of your business which are making money
  • Identifying growth areas for your business
  • Improve your debt management
  • Get an entirely new outlook on your business by hiring multiple professionals

You can get into serious legal trouble if you fail to manage this process quickly as many businesses are bound by strict laws under the Corporations Act.  You should definitely consider speaking with a business lawyer or getting online legal advice if your business is going broke.

You will also need to understand the differences with these concepts:

  • External administration
  • Voluntary administration
  • Receivership
  • Liquidation
  • Informal rescue

What is External Administration?

External administration is a broad term used to describe insolvency arrangements – it is the umbrella description for a person who may also be known as a:

  • Voluntary administrator
  • Liquidator
  • Insolvency practitioner
  • Receiver

What is Voluntary Administration?

Voluntary administration means an external administrator comes in and takes control of the company.  The administrator will take all responsibility for trading and decision making.  The administrator will investigate the state of the company and make a formal recommendation about whether or not it should continue.

Your business is protected from legal action during this time and the administrator may be able to bring the company back to profitability.

What is Liquidation?

This often follows after a negative assessment from an administrator.  A liquidator will wind the business up and sell all the assets to pay off its debts.

What is Receivership?

Receivership could be described as being half-way between liquidation and voluntary administration.  A receiver is appointed by a secured creditor to sell a company’s assets to pay off the company’s debts.  The business can still operate if it is able to after the receiver has sold off the assets it needed to pay off the debts.

Conclusion

If you have further questions, consider speaking to a business lawyer or getting online legal advice.

Webinars

How Franchisors Can Avoid Misleading and Deceptive Conduct

Wednesday 18 May | 11:00 - 11:45am

Online
Ensure your franchise is not accused of misleading and deceptive conduct. Register for our free webinar today.
Register Now

New Kid on the Blockchain: Understanding the Proposed Laws for Crypto, NFT and Blockchain Projects

Wednesday 25 May | 10:00 - 10:45am

Online
If you operate in the crypto space, ensure you understand the Federal Government’s proposed licensing and regulation changes. Register today for our free webinar.
Register Now

How to Expand Your Business Into a Franchise

Thursday 26 May | 11:00 - 11:45am

Online
Drive rapid growth in your business by turning it into a franchise. To learn how, join our free webinar. Register today.
Register Now

Day in Court: What Happens When Your Business Goes to Court

Thursday 2 June | 11:00 - 11:45am

Online
If your business is going to court, then you need to understand the process. Our free webinar will explain.
Register Now

How to Manage a Construction Dispute

Thursday 9 June | 11:00 - 11:45am

Online
Protect your construction firm from disputes. To understand how, join our free webinar.
Register Now

Startup Financing: Venture Debt 101

Thursday 23 June | 11:00 - 11:45am

Online
Learn how venture debt can help take your startup to the next level. Register for our free webinar today.
Register Now

About LegalVision: LegalVision is a commercial law firm that provides businesses with affordable and ongoing legal assistance through our industry-first membership.

By becoming a member, you'll have an experienced legal team ready to answer your questions, draft and review your contracts, and resolve your disputes. All the legal assistance your business needs, for a low monthly fee.

Learn more about our membership

Need Legal Help? Submit an Enquiry

If you would like to get in touch with our team and learn more about how our membership can help your business, fill out the form below.

Our Awards

  • 2020 Innovation Award 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice Award 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Financial Times Award 2021 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review
  • 2021 Law Firm of the Year Award 2021 Law Firm of the Year - Australasian Law Awards
  • 2019 Most Innovative Firm - Australasian Lawyer