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Voluntary administration
Practical Law ANZ Glossary w-004-2120 (Approx. 4 pages)
Glossary
Voluntary administration
A type of external administration in which an administrator is appointed to a company in financial distress. The purpose of voluntary administration is to give the company a short period of time ("breathing space") to determine whether a restructure or re-organisation plan (a deed of company arrangement (DOCA)) can be developed and executed. This may be possible where the company or its business (or some part of it) is salvageable. During voluntary administration, there is a moratorium on any enforcement or other proceedings being continued or commenced against the company.
The administrator's role is to assess the company's financial position, investigate the company’s affairs, report to its creditors and determine which of the following options is in the best interests of creditors:
- That the company enter into a DOCA.
- That the company be wound up (see liquidation).
- The administration end and the company be returned to the control and management of its directors.
The creditors of the company ultimately decide which of those options will be the company's fate.
An administrator may be appointed by:
- The company itself, when the directors decide that the company is either insolvent or likely to become insolvent (section 436A, Corporations Act 2001 (Cth) (CA 2001)).
- A secured creditor holding a security interest over all or substantially all of the company's property (section 436C, CA 2001).
- A liquidator or provisional liquidator if they decide that the company is insolvent or is likely to become insolvent at some future time (section 436B, CA 2001).
The conduct of a voluntary administration is governed by:
For further information, see Practice note: overview, Voluntary administration.