Voluntary administration Australia

Voluntary administration is designed to be a relatively quick process. Generally, creditors meet to decide the company’s future within 25 business days of the administrator being appointed, or 30 business days if the administration begins around Christmas or Easter. This timeframe can be extended by the Court where more time is required, particularly for complex administrations.

The appointment of a voluntary administrator does not automatically terminate employees. If the administrator continues to trade the business, employees are generally paid for work performed after the administrator's appointment. Outstanding entitlements from before the appointment are usually not paid during the voluntary administration, and how they are dealt with will depend on the outcome of the administration.

Voluntary administration involves directors giving control of the company to an independent administrator while its financial position and options are assessed. There is no guarantee the business will continue or that creditors will approve a proposed Deed of Company Arrangement (DOCA). Depending on the circumstances, the process may ultimately result in the company entering liquidation.

A voluntary administrator takes control of the company and investigates its business, property, affairs and financial circumstances. They assess the options available and report to creditors, including whether the company should enter into a DOCA, return to the directors' control or be wound up. The administrator must act independently and provide creditors with a recommendation about which option is in their best interests.

Voluntary administration is most commonly initiated by the company's directors when they believe the company is insolvent or likely to become insolvent. In certain circumstances, an administrator may also be appointed by a liquidator or provisional liquidator, or by a secured creditor who holds a security interest over all or substantially all of the company's property.

Yes. The voluntary administrator will decide whether continuing to trade the business is in the interests of creditors. Depending on the company’s circumstances, the administrator may continue trading, pursue a sale or restructuring, reduce operations, or cease trading.

Voluntary administration generally creates a temporary moratorium that prevents unsecured creditors from commencing or continuing enforcement action against the company without the administrator’s consent or the Court’s permission. Restrictions also generally apply to winding-up applications, recovery of leased property and enforcement of personal guarantees during the administration. Different rules and time limits can apply to secured creditors.

At the meeting to decide the company’s future, creditors may resolve that the company:

• enter into a DOCA;
• return to the control of its directors; or
• be placed into liquidation.

The administrator reports on each available option and recommends which outcome is considered to be in creditors’ best interests.