Voluntary Administration
Breathe, Reset, and Rebuild …
It’s Not Too Late
✔ Proactive options for distressed businesses.
✔ Defending your company from creditor action.
✔ Clear, jargon-free advice on the process.
✔ Compassionate and non-judgemental support.
✔ Expert guidance through every stage.
Company Administration … A Way Out of Financial Distress
When you’ve put time, passion, and investment into your business, you’ll do everything you can to stop it from failing. Yet, when things get really tough, and despite your best efforts to cut costs, chase invoices, and sort out your cash flow, your business still looks in serious trouble … you can reach breaking point.
It can seem like there are no options left. You’re disheartened, possibly feel like you’re defeated, and see the only way out is to close your business doors forever.
But, there can be a way out with Voluntary Administration.
At Ash Walker Lawyers, we know the fear and feeling of isolation you face. Trust us, Voluntary Administration isn’t a way to give up … it’s a powerfully proactive step you can take to regain control. We are here to give you the compassionate guidance and direction you need to find a positive way forward to a better, more profitable future.
What Is Voluntary Administration?
When your business is facing severe financial difficulties, it’s more than an uphill battle. With creditors knocking on the door, debts mounting up, and ATO demand letters falling through your letterbox … you’re under unrelenting pressure.
In stressful times like these, you need to be cut some slack. And, that’s what Voluntary Administration can provide.
Under Part 5.3A of the Corporations Act 2001 (Cth), it allows a company in monetary distress to appoint a qualified and independent Administrator. Basically, their role is to examine your company’s financial affairs, look at all possible options for its future, and give proposals to satisfy creditors.
And, while this is happening, the Voluntary Administration procedure means that most creditor claims and legal action are put on hold … giving you the much-needed space and time to reflect and find a positive way forward.
The Power of Voluntary Administration
Choosing to go into Voluntary Administration means you’re accessing the powerful support and advice of an independent, qualified person. Coming from outside your company, they deliver fresh eyes onto your financial situation, and can often see beneficial solutions and actions that otherwise you may not have considered.
The Advantages of Appointing a Voluntary Administrator Include:
- Shows responsibility – by allowing an expert to take control, it shows creditors, stakeholders, and the ATO that you are taking proactive steps.
- Prevents automatic liquidation – if you’ve received a Statutory Demand, it’s one of the three steps you can take to avoid being wound up.
- Pauses legal action – it can cause a temporary halt to court proceedings, saving you time, expense, and worry.
- A stay on unsecured debt – stopping the theoretical debt clock, giving your company a break from having to immediately address unsecured debts.
- Gives a structured route to business recovery – not just avoiding the necessity for liquidation, but building a plan for the future.
- Defends directors – from the punishments and personal liability arising from insolvent trading.
- Can keep the business trading – often, the business can keep operating and not shut down during Administration, maintaining business value.
- Clear timeline – Voluntary Administration has set time periods, giving certainty to directors, stakeholders, and creditors.
Use Voluntary Administration to Your Advantage
What Does a Voluntary Administrator Actually Do?
Allowing a completely unknown person to scrutinise your complete business activities and assume direct control can be unnerving. It may initially seem like you’ve lost all ownership and power … but in reality, it can just be a temporary pause.
It’s a requirement that the Administrator acts fairly. They aren’t there with the sole aim of shutting your business down, their mission is to find the most viable solution for creditors and your operation.
Generally speaking, their main jobs include:
Taking Short-Term Control of Your Company
In effect, the Administrator takes over the reins from the company directors. They oversee all business operations, make important decisions for your enterprise, and manage the company’s day-to-day running requirements.
Keeping the Business Trading
When the company is viable, it can continue to trade as close to normal as possible. This maintains the value of the business as a going concern, and can give your operation a chance to recover.
Exploring All Company Affairs
The Administrator will undertake a thorough examination of your business’s financials, liabilities, assets, and daily operations. This is to discover the actual position and viability of your company.
Reporting to Creditors
After the examination, the Administrator creates a report for the creditors. They will make a recommendation on one of three alternatives … returning control to the directors, a DOCA, or liquidation.
Wondering if Administration Is the Right Move?
The Three Outcomes of Voluntary Administration
A Deed of Company Arrangement (DOCA)
In most circumstances, this is the most suitable outcome for a business that has long-term viability. In essence, it’s a legally binding agreement between your company and the creditors, which aims to:
- Create the best possible opportunity for the company to continue trading, and/or
- Give a better return for creditors than winding up the company straight away.
The method by which these objectives are achieved could be a payment plan, business restructuring, reduced debt settlement, or any other terms agreed to by the creditors. As long as the majority of creditors agree, then it will apply to all of them, even those who may have disagreed.
Returning the Company to the Directors
In some cases, the Administrator may suggest that the company is returned back to the directors’ control. Usually, this will be because they have discovered that your business isn’t insolvent, a DOCA isn’t needed, and the directors can solve its financial issues without the need for the Administrator.
This opinion may happen when:
- The financial position of the company was misunderstood.
- The financial position of the company has improved.
- The factors that started the Administration process were temporary or have been solved.
- A DOCA isn’t needed as the creditors can be paid in full.
As long as the creditors agree to this option … Voluntary Administration finishes and the company is back in the directors’ hands.
Liquidation of the Company
If the Administrator believes that your company isn’t viable, there’s no apparent way to turn it around, and a DOCA isn’t suitable … they could recommend liquidation. The business is then wound up, its assets and stock sold, and the funds used to repay creditors.
Often, Administrators make this recommendation when:
- The company is insolvent, with its liabilities far exceeding its assets.
- The business cannot trade due to its financial position.
- There’s significant evidence of fraud or breaches of director duties.
- A DOCA isn’t feasible, or it’s rejected by the creditors.
If the creditors agree, the Administrator then usually becomes the liquidator. In most circumstances, the business then ceases trading.
Explore the Administration Options
Step-by-Step … The Voluntary Administration Process
In Australia, the process of Voluntary Administration follows strict timelines, duties, and regulations. As most directors will thankfully not have been through this procedure before, Ash Walker Lawyers will talk you patiently and considerately through the many steps.
Generally speaking, it works like this:
1. Decision To Go Into Voluntary Administration
The directors have a board meeting, and pass a resolution to appoint a Voluntary Administrator.
2. The Administrator Takes Control of the Company
The appointed Administrator manages the business’s operations, assets, and financial matters.
3. First Creditor Meeting
Inside eight working days of the appointment, the creditors must meet. They can vote to create a creditors’ committee and/or replace the Administrator.
4. Administrator Investigations
The Administrator examines the company’s financials, operations, and other affairs … and then provides a report to the creditors on the available options and their recommendations.
5. Second Creditor Meeting
Within 20 business days of the Administrator’s appointment, the creditors meet again and discuss the report. They then vote whether to return control to the directors, enter a DOCA, or liquidate.
6. Implementation
The decision made by the creditors is then followed.
Is Voluntary Administration the Correct Choice for Your Business?
For business owners and directors, admitting that your company is in trouble isn’t failure … it’s a powerfully proactive move that can bring long-term benefits.
At Ash Walker Lawyers, we will look at your business circumstances and advise whether Voluntary Administration is the best course of action. While all enterprises and situations are different, the signs your company may need to consider Voluntary Administration include:
- Ongoing and sustained trading losses.
- Persistent negative cash flow.
- Overdue tax debts.
- Facing ATO disputes and litigation.
- Consistent failure to meet ATO return obligations.
- Making late or partial payments to your suppliers and creditors.
- Suppliers are starting to demand upfront payments.
- Losing credit lines with creditors.
- Threats of, or the starting of, legal action by creditors to claim debts.
- Lenders are refusing to give you credit.
- Inability to create prompt or accurate financials.
If your operation is repeatedly experiencing one or more of these signals, it’s a sign you need to act, fast! Speak to Ash Walker Lawyers, as the quicker you seek expert guidance and can explore the Voluntary Administration option, the greater your chance of saving your business.
The Possible Downsides of Voluntary Administration
Voluntary Administration is undoubtedly a mighty lifeline for your business if it’s in severe financial distress. But, it’s not without its downsides:
Possible Disadvantages of Voluntary Administration
❗Losing control – as soon as the Administrator is appointed, you have to take a step back from your company.
❗Public knowledge – Voluntary Administrator appointments are in the public domain through ASIC, which may affect your and your business’s reputation.
❗Costs – Administrator expenses come from your company’s assets.
❗No survival guarantees – essentially, Voluntary Administration is an investigation into your company. The Administrator may feel it must be liquidated.
❗Director probes – your actions will be looked at, with the Administrator checking for insolvent trading or duty failures, which could lead to legal action against you.
Alternatives to Administration
Should Voluntary Administration not be the ideal option for your business, it’s worth looking at other avenues. Ash Walker Lawyers can help you examine the risks of Administration, and explore a wide spectrum of alternatives, including:
- Informal negotiations – talking with important creditors, including the ATO, to find a manageable and agreeable payment plan or a settlement.
- Refinancing or debt consolidation – we can give guidance on the legal implications of using a loan to address debt and improve cash flow.
- Small Business Restructuring (SBR) – for businesses that are eligible, it gives a simple and cost-effective way to manage debts and keep control.
Why a Lawyer Is Crucial for Voluntary Administration
The benefits of Voluntary Administration for businesses in financial distress are significant, but the stakes are equally high. Directors have important duties, responsibilities, and obligations in the process … and your actions will definitely be scrutinised.
Ash Walker Lawyers provides you with the guidance, understanding, and tailored advice you need during this crucial time. Having an experienced commercial debt lawyer during Administration gives you:
- Urgent action – guidance at short notice on all the initial procedures and steps, while making sure all legal requirements are met.
- Advice on your duties – outlining what you must do as a director before, during, and after the Administration, avoiding potential claims.
- Protection of your interests – working with the Administrator on your behalf, defending your legal rights during their in-depth investigation.
- Assistance with a DOCA – helping you understand the terms, your duties, negotiating with creditors, and making sure the agreement is in your best interests.
- Professional communication – acting as your first point of contact with the Voluntary Administrator and creditors.
- Legal representation – if you’re needed for a public examination, we can defend your rights and reputation.
- Advice on insolvent trading claims – if allegations are made, helping you defend against them.
Ash Walker Lawyers … Your Voluntary Administration Expert
Rapidly mounting debts and pressure from the ATO and trade creditors can make it feel like your business is about to collapse. These commercial stresses, combined with the worry of failure and feeling you’ve let down your staff, can be overwhelming.
But there are solutions with Ash Walker Lawyers.
Calmly and with genuine understanding, we can explore your company’s position, give guidance on whether Voluntary Administration is the best course of action, and find a way towards a more positive future.
With Ash Walker Lawyers, You Gain the Benefits Of:
FREE 24-Hour Hotline
Business debt worries don’t keep 9-to-5 hours, so get guidance when you need it most.
Urgent Response
Giving you clear, expert, and rapid advice and action on the initial steps of Voluntary Administration.
Non-Judgemental Help
Acting to help and support you and your business, not offer criticism and condemnation.
Advice on Director’s Duties
Making sure all your actions are compliant with Voluntary Administration regulations.
DOCA Assistance
Taking you through the DOCA terms, negotiating with creditors, and ensuring a Deed of Company Arrangement is in your interests.
Working with the Administrator
We act as your representative, ensuring your rights are protected throughout their investigation.
Transforming Chaos Into Clarity
Bringing reassurance and structure to stressful insolvency situations.
Considering Voluntary Administration?
Voluntary Administration FAQs
Who Can Appoint a Voluntary Administrator?
The Corporations Act 2001 states that there are three entities that can start Voluntary Administration:
- The company’s directors – after passing a board resolution.
- A secured creditor with a charge – over all, or substantially all, of the company’s assets.
- A Liquidator – when the company is already in liquidation, but the Liquidator believes there’s a better outcome for creditors through Administration.
Will Employees Still Get Paid if the Company Goes Into Administration?
If they can, yes! In many cases, the Administrator will try and continue to keep the company trading and to pay your employees as normal. But, this depends on the company’s current cash flow and decisions made by the Administrator.
What Happens to Directors’ Personal Guarantees in Voluntary Administration?
Voluntary Administration, while it places a pause on debt claims, doesn’t automatically halt personal guarantee enforcement. Creditors can still chase the directors personally for guaranteed debts.
What Is the Difference Between Liquidation and Voluntary Administration?
Voluntary Administration is a tool to save the company, if that’s possible, and maximise the returns to its creditors. Liquidation is a winding-up process, where the business’s assets are sold and the company is closed.
That said, if during the Administration creditors meeting, a DOCA isn’t accepted, liquidation could follow.