Related topics


01 Oct 2014

Business survival impossible without the support of critical stakeholders


3 min

20 to 40 cents in the dollar, versus nil

Recently, I was appointed the voluntary administrator of a company operating a local business whereby the director wanted to put forward a Deed of Company Arrangement ('DOCA') proposal to creditors. We discussed the proposal and it was going to be a reasonable proposal with a large up front lump sum payment and then payments from profits over time.

To facilitate the option for a DOCA, it was vital that the company continue to trade during the voluntary administration period. That being the case, I held immediate discussions with the bank who held security over all of the assets, the landlord, and the critical suppliers to the business. I explained the possibility of a DOCA proposal and they all agreed that they would continue to provide support during the voluntary administration period. I then continued to trade on the business with all focus on finalising the details of the DOCA proposal for creditors. The return under the DOCA proposal was looking like being anywhere from 20 to 40 cents in the dollar versus the return under a liquidation scenario which was likely to be nil.

Only a matter of days later the landlord issued a notice to vacate the premises. Without the premises, trade and therefore the DOCA was impossible. After discussions with the landlord it became clear that while the landlord appreciated that he was potentially losing any chance of recovering funds by evicting the company, and removing any possibility of a DOCA being put forward, he made it very clear that he did not want the tenant for the long-term. He was of the view that the company had been breaking numerous obligations and quite frankly didn't want to deal with the company any longer.

This sudden turn of events meant that a DOCA proposal was not possible. The company immediately ceased to trade and vacated the premises. The company was subsequently placed into liquidation and there was no return to creditors. Had the company taken more care in preserving its relationship with the landlord the outcome may have been very different.

The message that is clear that businesses need to ensure that they do all possibly to maintain positive relationships with key stakeholders in the business. The absolute critical stakeholders that need to be kept onside are;

1. The financing bank

2. The landlord

3. Critical suppliers

Without the support of the above stakeholders, survival in the business world is going to be very difficult, even impossible.

Business can be tough

Our team is focused and ready to help

Get in touch

Subscribe for all the latest help and news