COMPANY LAW

Company Law-Vandalay Chocolate Sprouts Pty Ltd

Company Law-Vandalay Chocolate Sprouts Pty Ltd

Introduction

This report aims to study the standing of the company Vandalay Chocolate Sprouts Pty Ltd as it applies to legal issues. The report describes the context of the situation and the primary creditors of the company. The legal issues that company might come across in the current situation are prioritized according to the significance. The report then details voluntary administration process and the legal rules pertaining to the process. The rules are applied to the situation of Vandalay Chocolate Sprouts Pty Ltd and legal advice is given in the end of the report.

Context

Vandalay Chocolate Sprouts Pty Ltd is a company which operated its business from a factory it rented from Industrial Park Ltd. The company has been facing acute financial troubles and its financial records were an unpromising chaos. The financial troubles are so acute that with Christmas coming up, its directors were doubtful whether the company would be capable to disburse its workforce their holiday pay entitlements.

The main creditors of the Vandalay Chocolate Sprouts Pty Ltd were its bank, Industrial Park Ltd and its employees. The bank is owed $1 million. This loan was unsecured but was guaranteed by the directors of Vandalay Chocolate Sprouts Pty Ltd. Industrial Park Ltd was owed $75,000 arrears of rent and employees were owed $350,000 unpaid wages. About three months ago the company was paid $100,000 from one of its customers. This was deposited into the bank account of company, reducing the amount owing to the bank. The current issue is about the case that if the company is placed in voluntary administration, how each of its abovementioned stakeholders would be affected.

Voluntary administration

The corporations Act 2001 (Cth) regulate the process of voluntary administration by a company. The process of voluntary administration gives for the property, business, and matters of a company which is insolvent to be controlled in a manner that increases the prospects of the company ongoing in subsistence to a maximum extent, or results in a enhanced proceedings for the creditors and members of the company as compared to the returns that would be gained from an abrupt termination of the company (Palmer, 2010, p.n.d.).

The principal use of the voluntary administration (VA) process is to give a lithe, effortlessly started and comparatively low-cost process that provides a company the advantage of an arrears suspension. This permits the company to try a negotiation or agreement with its creditors intended at preventing the termination or insolvency of the business or the company and maximizing the returns to creditors. If creditors concur to the agreement, it will be specified in a 'deed of company arrangement' which ties the creditors and the company. If these efforts not succeed, the law provides aid for the switch to winding up (Tunstall, 2005, pp.02).

For Vandalay Chocolate Sprouts Pty Ltd being financially troubled, it ius appropriate to consider the process of voluntary administration. As it owes a large sum of money to its three key creditors, voluntary administration ...