The most efficient and effective administrations are those available to individuals. The individual who operates a business which finds itself in trouble can make arrangements under Part 10 of the Bankruptcy Act. The individual simply arranges for a trustee to convene a meeting of creditors and in the process provides them with financial and other information as required by the law.

At the meeting, the individual owner puts a proposal to the creditors; it may be for a moratorium, a write off or a partial write off by the creditors of their debts or a payment over time. The proposal is put to the vote and if passed by the required majority then the business owner no longer owes the money to the creditors but has instead an obligation to fulfil the terms of the arrangement approved by the meeting.

It is similar to appointing an administrator to a company for reconstruction

Any debt or finance restructuring is a form of relief which may be just as effective as the introduction of fresh capital to the business.


The question is often asked: “How can I get the money to pay for all of the expert advice and assistance from accountants, lawyers and other consultants at a time when the fortunes of the business and presumably its cash reserves are at an all time low?”

Every such arrangement, which has as its objectives, trading the business out of its difficulties, must involve at least a moratorium from the creditors and financiers. Then assuming that the business is essentially profitable and because of the moratorium that is in place:

•The business will be able to accumulate or save its after tax profits and it is with those savings that the cost of reconstruction can generally be funded.  Additionally funds can be and are often raised from the sale of assets, surplus to the requirements of the business or injected by the proprietors into the business out of their private resources.

•Finally in most instances when the requisite percetnages 0f the creditors and financiers are convinced that the only prospect of recovery is through a trade on then the cost of the process may be financed by those creditors and/or financiers in that there will be a moratorium in place and more importantly an acceptance that they will receive less than 100%/$ of the amount due to them, and as often as not, payable over time.

Generally speaking the costs involved in a reconstruction process, are not borne by the owners, as is generally believed to be the case but indirectly by creditors and financiers.

If the business records have not been maintained, the proprietor would be well advised to have his internal or external accountants bring them up to date to reduce the costs of the process by not leaving this to the administrator.