Transcript

Hi, my name is Chris Cook. I am a principal at Worrells Brisbane. I have been in the insolvency industry for over 25 years and have undertaken a wide range of insolvency work, both in the corporate and personal insolvency areas. Additionally, I take on advisory engagements.

Today, we embark on the first of a four-part video series discussing the voluntary administration (VA) process. In this video, we'll provide a general overview of the voluntary administration process. The subsequent videos in this series will cover the time frame of a VA, a deed of company arrangement (DOCA), and finally, a walkthrough of one of our own voluntary administrations.

Voluntary administration is a formal process designed to offer companies facing insolvency an opportunity to restructure their affairs. The Corporations Act provides that the objective of a VA is to manage the business, property, and affairs of an insolvent entity in a way that maximises the chance of the company, or as much of its business as possible, continuing in existence. Alternatively, if it is not possible for the company or its business to continue in existence, the process aims to result in a better return for the company's creditors than would result from an immediate winding up of the company.

VAs are commonly initiated by directors when their company is insolvent or likely to become insolvent in the future—that is, when the company can't pay its debts as and when they are due and payable. Directors look to save their company by possibly obtaining a compromise of its legacy debt, recapitalisation, or simply some time to enable an orderly sale of its business under controlled conditions. This proposal is formulated by way of a proposal to creditors known as a deed of company arrangement (DOCA).

A DOCA proposal can be exceptionally flexible in what it can achieve to save the company and provide a return to creditors. During a VA, the administrator will assume control of the company, including any ongoing trading, while simultaneously conducting a thorough assessment of the company's affairs. This assessment will include evaluating its assets, liabilities, operations, and market position. Thereafter, the administrator will work with the directors to formulate a proposal to creditors under a DOCA. This process culminates in a report to creditors and a second meeting of creditors, laying out the options and providing a recommendation as to which outcome the administrator believes would be in the best interest of the creditors. These outcomes include whether the company should enter into a DOCA, be returned to the directors' control, or proceed to liquidation.

One of the cornerstone benefits of a VA is the moratorium it places on creditor actions, which is generally what an insolvent company needs. From the moment a VA starts, a statutory moratorium kicks in, providing immediate relief from creditor pressures. This moratorium freezes legal claims against the company, preventing the enforcement of debts and allowing the directors, the company, and its administrator the breathing room needed to develop a plan. In essence, a VA offers a lifeline—a chance to reset, restructure, and hopefully recover.

Thank you for watching, and don't forget to subscribe to our channel to stay up to date on insolvency, finance, bankruptcy, and more. We will see you in the next video, where we will cover the general time frame of a voluntary administration.