Voluntary Administration

Voluntary Administration

Voluntary administration is considered an alternative to the liquidation, to help insolvent companies satisfy their debts.

Currently, Voluntary Administration is viewed as a temporary means to enable proper administration of company affairs to maximise the chance of survival.

Voluntary administration can provide a number of attractive benefits to both debtors and creditors. Namely:

  • Increases the chances of the company’s continuing survival;
  • Placing a moratorium on creditors pursuing claims against a company.
  • Limit and avoid personal liability of directors under Director Penalty Notices or insolvent trading;
  • Maximise a better return for creditors compared with liquidation.

In this capacity it can be seen as a beneficial option to help a company trade out of short term financial and cash flow difficulties. Furthermore it helps provide a way to restructure the company to place it in a more financially healthy position.

If a company is insolvent, or on the brink, an administrator can be appointed by company directors giving him/her control. Similarly, liquidators and secured creditors have the ability to pursue voluntary administration in certain circumstances.

Once the administrator has been appointed he/she will control the company’s business, property and financial affairs. The first meeting of creditors will be held within eight days of this appointment allowing the creditors to discuss and vote on replacing the administrator, or electing representatives to advise and assist the administrator.

As an experienced administrator, Jonathan McLeod has overseen a significant number of administrations. In his role as an administrator, he assumes the ability to perform all and exercise any directors’ powers that could be exercised under the status quo. Including, but not limited to, continuing to trade or dispose of any part of the company’s business or property.

As part of the administrators role under Corporations Act 2001 (Cth), he/she will also thoroughly investigate the company’s affairs, report offences such as insolvent trading to the Australian Securities and Investments Commission (ASIC), assist the directors with putting forward a DOCA proposal, call a meeting of creditors to decide the future of the company and provide a report to creditors on the best available options going forward for creditors.

At the second meeting of creditors, up to a month after the administration commenced, a vote occurs on the future of the company.  There are three main courses of action that can be taken to end the administration:

  • A Deed of Company Arrangement (DOCA) to settle the debts;
  • Liquidation of the company;
  • Return control to the directors.

With an experienced team at the ready, Jonathan Paul McLeod is renowned for taking on administrations and finding the best possible solutions for all creditors. For more information on how we can help, please contact McLeod and Partners today.