Small and medium-size enterprises are considered the backbone of the American and European economies. In Australia, approximately 95 per cent of all businesses are SMEs. Therefore, it is a reasonable assumption that the vast majority of formal insolvencies are also SMEs.
When companies get to the point where they are insolvent, there are typically two types of actions that occur: a court or creditor liquidation whereby the business is shut down and all assets are sold, with the proceeds used to repay creditors, or a voluntary administration where an administrator is appointed.
The existing solutions
The voluntary administration alternative came from a recommendation of the 1988 Harmer Report to mitigate the loss of business value result…
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