The voluntary administration process is designed to assist insolvent companies satisfy their debts, by ensuring that they can either:
- Come to a formal arrangement with their creditors to pay those debts through a Deed of Company Arrangement (DOCA); or
- Be placed into liquidation, quickly and inexpensively.
The voluntary administration process maximises the chances of a company continuing to exist by giving it the opportunity to propose a DOCA to its creditors.
Why Choose Voluntary Administration?
A voluntary administration offers a collaborative approach to satisfying the company’s debts. It restrains creditors from enforcing their claims and can assist a company to trade out of short-term difficulties caused by cash-flow restrictions or one-off financial problems. When appropriate, it can also provide a way to restructure a business or the company itself to revive it to a healthier financial position.
How Does A Voluntary Administration Begin?
A voluntary administration begins when an appointment document is executed by either:
- The company directors after resolving that the company is, or is about to, become insolvent;
- A liquidator if a proposed DOCA will provide a better return to creditors than the continued liquidation; or
- A secured creditor after their finance agreement terms have been breached and the administrator consents to the appointment.
What Is the Voluntary Administration Process?
A voluntary administrator is appointed to control a company’s affairs. The administrator convenes two meetings of creditors. The first meeting is held within eight business days of the appointment. The second meeting is usually held within 20 to 30 business days after the appointment. At the second meeting, creditors will choose the option they believe will best serve their interests. The two most common outcomes of a voluntary administration are a DOCA’s execution or the company’s liquidation.
What Does A Voluntary Administrator Do?
The voluntary administrator will:
- Take control of the company’s assets;
- Investigate the company’s affairs;
- Report any offences to the Australian Securities and Investments Commission (ASIC);
- Assist the directors to formulate a DOCA proposal;
- Report to creditors on the course of action that gives for the best outcome for creditors; and
- Call the required meetings of creditors to decide the company’s future.
When Does A Voluntary Administration End?
The voluntary administration ends when:
- A DOCA is fully executed;
- The creditors resolve to wind up the company;
- The creditors resolve that the voluntary administration should end;
- The court orders that the administration is to end;
- The approved DOCA is not signed within 15 business days of the second meeting;
- The period for calling the second meeting ends without the meeting being called; or
- The court appoints a liquidator to the company.