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Voluntary administration
Practical Law ANZ Glossary w-018-2943 (Approx. 3 pages)
Glossary
Voluntary administration
A type of insolvency procedure 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 (a period of time during which a certain activity is not allowed or required) 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 be placed into liquidation.
- That the company enter into a DOCA.
- 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 may become insolvent (section 239I, Companies Act 1993 (CA 1993)).
- A secured creditor holding a charge over the whole or substantially the whole of the company's property (section 239K, CA 1993).
- A liquidator or interim liquidator if he or she thinks that the company is insolvent or is likely to become insolvent (section 239J, CA 1993).
- The court on the application of a creditor, a liquidator of the company, the Registrar of Companies or the Financial Markets Authority (FMA) (if the company is a financial markets participant) (section 239L, CA 1993).
The conduct of a voluntary administration is governed by Part 15A of the CA 1993 (Part 15A has been amended to implement a new licensing and regulation regime for administrators, see the Insolvency Practitioners Regulation Act 2019 and the Insolvency Practitioners Regulation (Amendments) Act 2019. The new licensing and regulation regime commenced on 1 September 2020 (with a one-year transition period for individuals to apply for licensing)).
For more information, see Practice note: overview, Voluntary administration.