Voluntary Administration

Voluntary Administration is a process which provides companies facing insolvency with the ability to:

Upon appointment the Voluntary Administrator assumes full control of the company and manages its ongoing affairs. The Voluntary Administrator assumes control of the company’s business, property and financial affairs.

The Voluntary Administrator assumes sole responsibility to perform all functions and exercises any and all director powers that could be exercised if the company was not under Voluntary Administration, including continuing to trade or dispose of all or any part of a business or property. The director(s) and all other officers of the company lose all their powers in relation to the company during the administration process.

The appointment of a Voluntary Administrator can be made by:

The Voluntary Administrator convenes two meetings of creditors of the company.

The first meeting is held within 8 business days of the appointment and the second meeting is usually held within 20–30 business days after the appointment.

At the first meeting of creditors, creditors consider the following as required by the Corporations Act 2001 (“Act”):

Before convening the second meeting of creditors the Administrator is required pursuant to the Act, to issue a report to creditors detailing the results of his/her investigations, and provide an opinion on the following three courses of action available to creditors of the company when deciding the course of action for the company which best suits creditors’ interests:

The second meeting may be adjourned by creditors for up to 45 business days for further investigations to be carried out, or for a proposed DOCA to be amended. The Court has the power to extend this period if there is a genuine reason for an extension.

Secured creditor(s) have 13 business days from the appointment date of the Voluntary Administrator to exercise their security i.e. appoint a Receiver and Manager. Failing to exercise their security within the specified time binds the secured creditor to a moratorium for the duration of the Voluntary administration period and no enforcement action can be taken by the secured creditor(s).

Unsecured creditor(s) are bound by a moratorium from the moment a Voluntary Administrator is appointed and cannot take any enforcement action or apply to wind up the company. A provisional liquidator can only be appointed by the leave of the court and all current proceedings or enforcement actions against the company are put on hold.

Part 5.3A, Section 440B of the Corporations Act 2001 imposes restrictions on:

The Voluntary Administrator may still sell or dispose of assets:

Any disposal made by the Voluntary Administrator requires the sale proceeds from the secured property to be distributed to those holding relevant security interests.

Unless landlord(s) have commenced enforcement action prior to the appointment of the Voluntary Administrator, landlord(s) are bound by the same moratorium applying to all other creditors.

Pursuant to Section 443B of the Corporations Act 2001 the Voluntary Administrator can occupy the company’s leased premises for up to 7 calendar days without paying rent, but must pay rent for the remainder of the Voluntary Administration period.

The Voluntary Administrator’s liability to the landlord ends at the conclusion of the Voluntary Administration or when the premises are vacated. The Voluntary Administrator will not be liable for rent if the Voluntary Administrator does not have possession of the property. However, the company will continue to incur liability for the rent.

Creditors holding third-party guarantees from director(s) are bound by the moratorium during the period of the Voluntary Administration. After the Voluntary Administration ends, guarantees can then be enforced.

The Voluntary Administration ends when:

To arrange a free and confidential discussion about entering your business into Voluntary Administration, or to learn more about our other Corporate Insolvency solutions, contact the Hamilton Murphy team.