Voluntary Administration

What is a voluntary administration?

Voluntary administration is an insolvency procedure where the directors of a financially troubled company or a secured creditor with a charge over most of the company’s assets appoint an external administrator called a ‘voluntary administrator’.

The role of the voluntary administrator is to investigate the company’s affairs, to report to creditors and to recommend to creditors whether the company should enter into a deed of company arrangement, go into liquidation or be returned to the directors.

A voluntary administrator is usually appointed by a company’s directors, after they decide that the company is insolvent or likely to become insolvent. Less commonly, a voluntary administrator may be appointed by a liquidator, provisional liquidator, or a secured creditor.

What is the voluntary administration process?

*Unless the court allows an extension of time.

What is the effect of a voluntary administration?

The effect of the appointment of a voluntary administrator is to provide the company with ‘breathing space’ while the company’s future is resolved. While the company is in voluntary administration:

1. unsecured creditors can’t begin, continue or enforce their claims against the company without the administrator’s consent or the court’s permission
2. owners of the property (other than perishable property) used or occupied by the company, or people who lease such property to the company, can’t recover their property
3. except in limited circumstances, secured creditors can’t enforce their charge over company property
4. a court application to put the company in liquidation can’t be commenced, and
5. a creditor holding a personal guarantee from the company’s director or another person can’t act under the personal guarantee without the court’s consent

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Phone: 02 8315 2146
E: guy@gbaxendale.com.au