Introducing the ‘Entrepreneurs Administration’

This is me spitballing a UK idea, but let me introduce the ‘Entrepreneurs Administration (EA)’ an Australian form of Voluntary Administration that could allow directors to trade their business, purchase stock, run day-to-day operations, etc, despite it being in the hands of a VA.

Given COVID19 impacts on business, we need to think of new ways to help restructure companies in a low cash flow environment. That’s where an EA might work, and where section 198G comes in – but you need consent first!!

A difficulty in allowing a business to trade during the VA is supporting the cost of doing so (eg someone at professional rates running a retail store is not always feasible) through operating cash flows.

Historically, entering into a licence agreement with a new entity set up by the director could help – but they are risky. EA’s may help overcome this too.

Corporations Act:

– s435A outlines the purposes of the VA regime, and para (a) is critical here: “maximise the chance of the company … continuing in existence.”

– s198G: directors rights are effectively stayed during the VA.

– s198G(3)(b): this doesn’t apply if you get consent from the VA or Court.

I reckon consent may be granted if 435A(a) is met, and the VA is satisfied checks and balances are satisfactorily in order. Like ensuring it can pay post-VA costs – rent, employees, utilities and suppliers, etc.

Depends on individual circumstances, so go get advice!

Consent to EA Draft 17042020

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