Voluntary administration is a structured process where an administrator takes control, investigates the company’s financial position, and creditors decide its future. Typically completed within 20–30 business days, it may result in restructuring, returning control to directors, or liquidation, depending on whether the business is viable.
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On This Page
- Introduction
- Voluntary Administration: Process and Outcomes
- Important Points to Remember
- Next Steps
- FAQs
Introduction
When a company can’t meet its debts, voluntary administration offers a way to pause and reassess. It is a time-limited process designed to protect the business while options are reviewed. Knowing what happens at each step helps reduce uncertainty.
This blog explains how the voluntary administration process works from start to finish.
Voluntary Administration: Process and Outcomes
Process
Voluntary administration follows a structured process with clear steps.
The Handover
The board of directors resolve that the company is insolvent or likely to become so. They appoint an administrator who takes immediate and total control of the business, its assets, and its operations.
The Investigation
Within 8 business days of being appointed, the administrator arranges the first creditor’s meeting to confirm their appointment.
The administrator then spends the following weeks auditing the books and investigating the company’s affairs to prepare a detailed report for creditors.
The Decision
At a second meeting, usually held 20-25 days from the day of appointment, creditors vote on the company’s future based on the administrator’s recommendation.
Outcomes
At the second creditors’ meeting, creditors decide the company’s future based on the administrator’s report and recommendations. There are three possible outcomes:
Accept a Deed of Company Arrangement (DOCA)
If creditors believe the business can continue, they may approve a DOCA. This is a binding agreement that sets out how the company will repay its debts over time, often at a reduced amount. The company may continue trading under agreed terms while implementing the plan.
Return Control to the Directors
If the company is considered viable without restructuring, creditors may vote to end the administration. Control of the company is then returned to the directors, and normal operations resume.
Place the Company into Liquidation
If the company is no longer viable, creditors may vote to wind it up. A liquidator is appointed to sell company assets and distribute proceeds to creditors, after which the company is deregistered.
Important Points to Remember
Director Control Ends Immediately
Once an administrator is appointed, directors lose control of the company and cannot make decisions without approval.
Strict Timeframes Apply
The process follows tight deadlines, with key creditor meetings typically held within 20–30 business days.
Creditor Moratorium
Most creditor enforcement action is temporarily paused, giving the company time to assess its position.
Administrator Responsibility
The administrator takes full control of operations and must act in the best interests of creditors.
Creditor Decision Determines Outcome
Creditors ultimately decide whether the company is restructured, returned to directors, or placed into liquidation.
Directors Must Cooperate
Directors are required to provide all company records and submit a ROCAP (Report on Company Activities and Property).
Business May Continue Trading
The company can continue operating during administration if the administrator believes it is viable.
Not All Businesses Are Saved
Voluntary administration does not guarantee recovery. If the business is not viable, liquidation may still follow.
FAQs
Can a business still use its bank accounts normally once an administrator is appointed?
No, existing bank accounts are usually frozen and the administrator opens new “Administrator’s accounts” to manage all incoming and outgoing cash.
What happens to the company’s website and social media profiles?
The administrator takes control of all digital assets and must ensure any public-facing platform mentions the company is “Under Voluntary Administration.”
Can a company enter voluntary administration more than once?
Yes, but if it happens repeatedly in a short period, ASIC or the court may investigate it as an abuse of the process or a sign of “phoenixing.”
Will the company’s credit rating be permanently ruined?
The administration is a public record that will impact the company’s credit score, but a successful restructure (DOCA) is viewed more favorably than a total liquidation.
Is the administrator allowed to stop paying the company’s insurance premiums?
No, the administrator must ensure all essential insurance—like workers’ compensation and public liability—remains active to continue trading legally.
Can a director buy the business back from the administrator?
Yes, directors are allowed to submit a bid to purchase the business assets, provided it represents the best value for the creditors compared to other offers.
What happens if the administrator finds evidence of illegal activity?
They are legally required to lodge a “Section 533” report with ASIC detailing any suspected offenses, such as insolvent trading or a breach of director duties.
Can shareholders vote at the creditors’ meetings?
No, the meetings are strictly for people the company owes money to; shareholders only get a say if there is a surplus of funds left over after everyone is paid.
