Today we bring you news of Sydney-based home builder Wincrest, which has become the latest company to do the seemingly impossible – come back from a company collapse.
Wincrest was put into administration in late January with debts of $12 million, but a capital injection has helped it convince creditors to approve a deed of company arrangement (DOCA) and let the company get back to business.
In the past few weeks, we’ve seen number of companies in administration manage to escape the noose via a deed of company arrangement, including Queensland property development firm Raptis and car audio and mobile phone retailer, Strathfield.
It’s always great to see an SME given a second chance, but what’s behind the sudden rash of DOCAs? Are creditors suddenly becoming more forgiving?
Not likely. According to insolvency specialist Jim Downey, we should expect to see a lot more DOCAs approved by creditors thanks to changes in the laws surrounding insolvency that were made in December 2007.
Before that, it was difficult to actually put a company that deserved to go straight into liquidation into liquidation; administration was a far easier process.
This meant that 80% of companies that went into administration eventually ended up in liquidation, and administration quickly became seen as the death-knell of a business.
But changes to the law mean it is now far easier to put a company in liquidation straight away. As a result, administration should now be seen as a process by which a troubled company can turn itself around and get out of trouble, usually via a DOCA.
So administration need not be the end of the world – after all, every entrepreneur deserves a second chance.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
