FNSTPB504 - Corporation & Trust Law

Chapter 8 - External Administration of companies

1.What is the purpose of a voluntary administration?

2.YummyTummy Pty Ltd (YummyTummy) is a 44 year old business which manufactures and retails desserts. Yummy Tummy operates 17 shops throughout Australia which are leased from shopping centres and its products are also sold through gourmet shops and restaurants. YummyTummy employs 400 people, owns two large commercial bakeries freehold and two commercial bakeries subject to mortgage with the Global Domination Bank.

Currently, the business is performing poorly. YummyTummy is 3 months behind in payment on 10 of its leases, and 5 months behind in payment on both of its mortgages, and 2 months behind in payment to its flour supplier. So far all employee wages and entitlements have been paid, but the directors are worried about the financial position of the company.

Advise the directors ad to what action they should take and the likely consequences of such action.

3.What is the risk to the directors of YummyTummy if they take no action to address the company's financial problems but instead simply continue to trade?

4.How may creditors or consumers of YummyTummy find out if it has gone into external administration?