Corporation Law: Analysis of Ralan Group's Voluntary Administration

This assignment analyzes the collapse of the Ralan Group, a major Australian property developer, which went into voluntary administration. The report explores the context of the collapse, including the construction slump and its impact on the Australian economy. It delves into the concept of voluntary administration in Australia, the role of the administrator, and the implications for creditors and investors. The report discusses the financial instability caused by reduced building approvals and the drop in the share price of Adelaide Brighton. It also examines the benefits and potential drawbacks of voluntary administration, referencing the Corporations Act 2001 (Cth). The conclusion suggests that the situation is temporary and that the industry will recover by 2020-2021. References include news articles and academic sources.

Running head: CORPORATION LAW
CORPORATION LAW
Name of the Student:
Name of the University:
Author Note:

1CORPORATION LAW
INTRODUCTION:
Recently the Australian economy band financial market were shaken when the news
came that the eminent property developer Ralan Group collapsed. Rayan Group is considered as
one of the most significant and major property developers of Sydney that went into voluntary
administration. It has specialization in the field of developing property together with their
marketing and managing. Such property comprises of both commercial as well as residential
projects not only in Sydney but also in Gold Coast. As a result of this, the future of billion
dollars residential project together with the future of the creditors and investors were in stake.
Though the national Australian market pertaining to property development and investment is
showing recovery signs but this ongoing slump of the construction industry is causing turbulence
in this sector along with the administration of Rayan group. In this assignment, light is being
thrown on the media article regarding the collapse of Rayan group, a property developer
published in 1st August in an online daily (abc news, 2019).
DISCUSSION:
In Australia, voluntary administration refers to a method by means of which a company
which is insolvent is given in the control and management of an independent individual called
the voluntary administrator (Hibberd & Kingston, 2017). His role is to cause investigation of the
regarding the affairs of a company undergone insolvency such that a report can be made to the
creditors and also recommendations can be made to them whether such company can enter into
liquidation, a company arrangement deed or to be given back to the directors (Chang & Wee,
2016).
In Australia, there happened a huge financial instability when the approvals related to
building construction reduced by around 25.6% since 2018 as per the current figures issued by
the Bureau of Statistics (ABS) (Lenzen et al., 2017). All these led to the voluntary administration
of the Ralan group due to the construction slump bad hit the profits of Adelaide Brighton
(Landherr, 2018). Another impact that is prominently visible is that the developers are
deliberately either causing delay or abandoning apartments that they planned to build because of
the intensification of construction down turn.

2CORPORATION LAW
The administrator appointed for voluntary administration of Ralan Group was Grant
Thornton who said that he would be performing the financial assessment in an urgent basis into
the Ralan group of companies together with its subsidiary companies (abc news, 2019). There
were about 57 companies subsidiary to Ralan group that are also subjected to administration. As
per the administrators appointed, Ralan is having about 3000 residential units under its
development prospectus of which some are in construction whereas some are in the prior- to sale
stage (abc news, 2019). Moreover it has got about 600 rooms that are already under operation as
the operating accommodation. It further stated that though the value of the creditors is not yet
confirmed but it can be assumed it will be no less than 500 million dollars. Rayan group has
many high profile construction developments of one is Ruby Collection hotel, a 4 tower
development, situated at Surfers Paradise and it consists of about 1600 apartments and its present
market value is about 1.4 billion dollars (abc news, 2019).
The managing partner at the national level belonging to Grand Thornton named as Said
Jahani commented that the business affairs of the company is found to be usual. He further said
that they are still in close discussion with the company stakeholders for identifying and
preserving the interest of the creditors (abc news, 2019). But it failed to provide an idea behind
the collapse as the investigation is still on process. But it is quite common and known to all that
such voluntary administration occurred when the company turns insolvent such that it is financial
difficulties and it owes more amount of money that is able to make. But the main benefits of
such type of administration are that the claims of the creditors are fixed such that the company is
allowed some breathing time for assessing its financial position and near future (Dickfos, 2016).
It also allows the company to carry on its trading when its future was being assessed. Voluntary
administration is not an expensive way of initiation. It allows the creditors an absolutely
independent and a new way of reviewing a company and also the business viability of the same.
Further voluntary administration gives a tool by which debts can be compromised with the
company creditors.
Whether any of these benefits is actually achieved by the voluntary administration of
Ralan group is required to be analysed or it is undergoing voluntary administration only to
defraud its creditors and investors is subject to analysis (Kaye & Sasson, 2015). Moreover the
administrator had a major role to play as per the provisions enumerated under the Corporations

3CORPORATION LAW
Act 2001(Cth). As per chapter 5 of the Act, provisions of external administration of a company is
given.
The sudden drop in the price of the shares belonging to Adelaide Brighton is to be
discussed too (abc news, 2019). It had lost almost quarter of the share value since 26th July 2019.
The latest price of its shares dropped to about 18.1 % at one go. Though the company has blamed
the softening situation of the civil as well as residential constructing markets for this drop in
share price but this matter is subjected to be further investigation by ASX (abc news, 2019).
Another reason given by it is the pressure it is being subjected because of competition due to the
increase of the costs of the raw materials sustainably. Previously, the Adelaide company asked
its investors to control and reduce their expectations as it expected the profit to be incurred this
year will be less than last 2 years. All these led to the drop in share prices which eventually led to
the voluntary administration of the Ralan (abc news, 2019).
Conclusion:
However, it is expected that it is temporary and the Rayan group along with Adelaide will
turn back and come out of these difficulties with flying colors. The dwelling industry of
Australia is expected to grow again by 2020-2021 as commented by Robert Mellor, the
managing director of BIS. He also added that growth in the prices as well as rent of houses will
be enhanced which will eventually create a upswing in the building sector by the mid of 2020.
However a fall in non- residential sector is also expected.

4CORPORATION LAW
References:
abc news. (2019). https://www.abc.net.au/news/2019-07-31/construction-slump-hits-profits-
adelaide-brighton-ralan-group/11369548.
Chang, M., & Wee, M. (2016). The effect of voluntary versus mandatory adoption of trading
policies on the returns to insider trades. Pacific-Basin Finance Journal, 38, 76-87.
Corporations Act 2001 (Cth)
Dickfos, J. (2016). The Costs and Benefits of Regulating the Market for Corporate Insolvency
Practitioner Remuneration. International Insolvency Review, 25(1), 56-71.
Hibberd, M., & Kingston, S. (2017). Voluntary administration-is your appointment
valid?. Australian Restructuring Insolvency & Turnaround Association Journal, 29(1),
18.
Kaye, R., & Sasson, E. (2015). Corporate law: Voluntary administration: No escape from
judgment in the district court. LSJ: Law Society of NSW Journal, (11), 90.
Landherr, S. (2018). Adelaide Brighton Ltd (ASX: ABC). Equity, 32(7), 14.
Lenzen, M., Geschke, A., Malik, A., Fry, J., Lane, J., Wiedmann, T., ... & Cadogan-Cowper, A.
(2017). New multi-regional input–output databases for Australia–enabling timely and
flexible regional analysis. Economic Systems Research, 29(2), 275-295.