1. Name of company and date of collapse. Identify the name of the business and when the business collapsed or was put into Administration.
The company I have chosen to research for this task is Dick Smith Holdings Ltd which was placed into administration on the 4th of January 2016.
2. Reasons identified for collapse. Detail the reasons provided for the collapse of the business.
There are a lot of different reasons that all played a major role in the collapse of this company. The issues begun when Woolworths Ltd sold the electronic store to Anchorage Capital in 2012. Anchorage Capital has a history of buying companies and then floating them on the Australian Stock Exchange (ASX).
When a company like Anchorage Capital shows the number …show more content…
Concept of Insolvency. Give a detailed explanation of the concept of insolvency.
An insolvent company is one that is unable to pay off its debts when their payment is due. The three most common corporate insolvency procedures are voluntary administration, liquidation and receivership.
Voluntary administration is an insolvency procedure where the directors of a financially troubled company or a secured creditor who is in charge of most of the company’s assets appoint an external administrator. Their role is to investigate the company’s affairs, to report to creditors and to recommend to them whether the company should enter in an act of company agreement, and go into liquidation.
Liquidation involves quite a lengthy process. It begins with concluding a company’s financial dealings in order to disassemble the company’s structure. Then the relevant authorities undertake appropriate investigations and fairly distribute the company’s assets to its relevant creditors.
A company most commonly goes into receivership when a receiver is appointed by a fortified creditor who holds security over some or all of the company’s assets. The receiver’s primary role is to collect and sell enough of the company’s charged assets to repay the debt owed to the secured creditor. In a sense this process is quite similar to when a company goes into voluntary administration. A third party organisation comes into the company to distribute assets …show more content…
Overview of the procedure of both Acts. Identify the procedures for insolvency under the Bankruptcy Act and Corporations Act.
In order to declare insolvency, there are two different procedures in which companies or individuals must follow to comply with either the Bankruptcy Act or the Corporations Act. Listed below are the procedures for each Act separately:
Bankruptcy Act: o The individual gives up personal control to their assets and finances to a trustee. They then sell all realisable assets and use the money to repay creditors. o The individual must then apply for bankruptcy. They can do this by lodging a petition and statement of affairs with the Official Receiver in Bankruptcy or Federal Court. o The individual is required to complete a statement of financial affairs listing all known assets and liabilities. Their debts are then also frozen. o The trustee then controls all of the assets and other creditors cannot legally independently pursue the bankrupt individual for payment. o The trustee then sells all of the assets and uses funds to make an orderly repayment to creditors. o If any assets are remaining after all debts have been paid, they then get returned back to the individual declaring