Voluntary Administration is the process whereby an insolvent company is placed into the hands of an independent registered liquidator (called the voluntary administrator) who takes full control and assess available option to avoid liquidation.
Voluntary administration usually occurs when a company becomes insolvent and cannot meet the creditors’ requirements. Other times, it may need a freeze on creditor requirements to rebuild a more sustainable business process and turn a profit through employee layoff and cost reduction.
What about my debt?
As a creditor, the voluntary administration process is designed to put the company that owes the debt in the best possible position to fulfill their obligations. While you will not be able to commence legal proceedings against the company, you can formally lodge your claim with the administrator through a proof of debt form.
What type of interest do you have?
If a business is in debt to you, then you are a creditor.
What is the Voluntary Administration process?
Step 1: Appointment of voluntary Administrator
The voluntary Administrator can be appointed by either the directors, a secured creditor or
a Liquidator. The appointment of the Administrator is usually provided on ASIC Insolvency
Notices website.
Step 2: First meeting of creditors
The Administrator must hold the first meeting of creditors within eight business days of
being appointed and provide at least five business days’ notice of the meeting to creditors.
Creditors can vote at the meeting to either replace the Administrator or form an inspection committee to work closely with the Administrator.
Step 3: Voluntary Administrator’s investigation and report
The Administrator will investigate the company’s affairs and report to creditors on the
alternative options available to the company. This will determine whether the company can
pay off its debts, and the report will recommend an outcome for the company such as
suggesting to continue with business and pay off the debt or look to wound up.
Step 4: Second meeting of creditors
The voluntary Administrator must hold the second meeting to decide the company’s future
within 25 business days of being appointed.
At least five business days notice of the meeting must be given to creditors.
Creditors have 3 options in this meeting (convened under s 439A):
- Return the company to the directors’ control (ending the voluntary administration);
- Have the company execute a DOCA (Deed of Company Agreement) which is a binding agreement between the company and creditors where the company will pay all/some of its debts; or
- Place the company into liquidation. This is where the company cannot pay off its debts and the administrator will become the liquidator and sell off all remaining
assets of the company. The administrator will then lodge notice of the outcome of the meeting to ASIC within 5 business days.
If you think that the above circumstances might apply to you or your business, or are
considering your options in relation to Administration, please do not hesitate to seek expert
debt recovery advice by requesting a confidential consultation with Roser Lawyers.