Voluntary Administration

Appointment of a voluntary administrator, in the main, is limited to companies which are insolvent or experiencing financial difficulty. A voluntary administrator can be appointed by:

• the company, where the board resolve that the company is insolvent or likely to become insolvent;
• a secured party, if provided for in the security agreement and the security interest has become, and is still, enforceable; or
• a liquidator.

Following his or her appointment, the voluntary administrator takes control of the company’s operations and assets. During the period of voluntary administration, generally about 35 days, the voluntary administrator operates the company’s business (generally with the support of incumbent management), conducts an investigation into the company’s affairs, and works with the directors of the company (or other interested parties) in devising a strategy which will enable the continuation of the company’s business activity and/or a better return to creditors. Any such strategy is then put to creditors as a proposed deed of company arrangement. In the absence of any proposed deed of company arrangement, the company generally proceeds to liquidation.

Advantages include:

• A voluntary administrator can be appointed very quickly.
• The appointment provides a statutory moratorium on existing debts, in that it prevents enforcement action by creditors (other than by certain secured parties under specific circumstances) and the company cannot be wound up either voluntarily or by court order during the period of voluntary administration unless the Court determines that a winding up is in the best interest of creditors.
• Control of the company’s assets and activities immediately passes to an independent and qualified third party.
• Owners or lessors of property owned or used by the company are generally precluded from recovering their property during the voluntary administration period, hence preserving the business intact.
• There is no significant limitation on what type of arrangement can be proposed as a deed of company arrangement. A deed of company arrangement may envisage a compromise with creditors, an extension of the moratorium, a combination of both or some completely different reconstruction.
• It is the creditors who ultimately determine the fate of the company. The voluntary administrator must form an opinion and make a recommendation to creditors as to whether the company should implement a deed of company arrangement, be wound up, or the administration end. However, it is the creditors who determine the future of the company. The resolution of the majority binds all creditors.

The appointment of a voluntary administrator, depending on the circumstances, may also avoid personal liability under the director penalty regime of the Australian Taxation Office and avoidance of certain recovery actions only available in the event of liquidation.

The success to date of the voluntary administration regime is testament to the fact that it provides the fastest and most flexible form of external administration and can provide solutions which are not possible or practical under other forms of external administration.

The principals of DW Advisory have vast experience in the voluntary administration process and have successfully administered countless companies through the voluntary administration and deed of company arrangement process.

Determining insolvency can be complicated, use our self-evaluation questionnaire to determine whether you are experiencing signs of insolvency.

For more information on the voluntary administration process, please contact us to arrange an immediate initial interview without obligation.