What is Voluntary Administration ?
A Voluntary Administration enables
directors to take advantage of a
moratorium period during which an
external administrator is in control of
their company, to propose an
arrangement for payment of debts for
consideration by the company's creditors.
Why appoint voluntary
The purpose of a voluntary administration is to
provide a flexible procedure enabling a company
time to attempt a compromise or arrangement with
its creditors, which may save the company, the
business and jobs while maximising the return to
Voluntary Administration is utilised to provide the
company with a chance to trade out of its
difficulties at a time when the company is unable to
pay its debts, that is, it is insolvent.
How does the administration begain ?
Voluntary Administrators are normally appointed by
the directors of the company. Appointment is initiated
when the directors of the company resolve that the
company is, or is likely to become insolvent.
The directors simply have to be satisfied that there is a
likelihood that the company will be insolvent at some
Appointment by a liquidator or provisional liquidator
Appointment by Secured Creditors
Who can act as administrator ?
An administrator must be a
registered liquidator as
required by the Corporations
What happens on the appointment of an administrator ?
The administrator takes control : On appointment, control of the
company and its property, business and affairs is vested in the
administrator. The administrator is therefore responsible for the
company's affairs in the same way that the directors were prior to the
A moratorium is put in place : To give the company breathing space,
as and from the commencement of the administration, a moratorium
comes into effect preventing creditors from taking actions or
proceedings against the company or its property during the
administration without the administrator's written consent or the
Indemnity : The administrator is entitled to an indemnity out of the
company's property for remuneration and personal liabilities incurred
during the administration. The indemnity has priority over debts of
the company secured by a floating charge on property, unless the
chargee has either commenced enforcement of or actually enforced
the charge before the administration began.
ENDING AN ADMINISTRATION
An administration will end when:
A Deed of Company Arrangement is executed; or
The creditors resolve that the administration should end;
The creditors resolve that the company be wound up; or
The Court, on application of the company, orders that
the administration end; or
The time period for calling a meeting of creditors as
prescribed under the Corporations Act has not been met.
Removal of an administrator
The administrator of a company may be
removed by resolution of the creditors
at the first meeting of creditors. This
meeting must be held within eight
business days after the administration
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