Directors should seek voluntary administration advice as soon as insolvency risk appears, not after creditors take action. Early advice helps assess solvency, understand legal duties, and explore options before control is lost. Speaking to an insolvency practitioner or adviser early provides clarity without committing to voluntary administration.
FREE Download: Checklist before your company enters Voluntary Administration
On This Page
- Introduction
- When Should You Consider Voluntary Administration
- Early Insolvency Warning Signs
- Directors’ Legal Duties Once Insolvency Is a Risk
- When to Seek Professional Advice & Whom to Speak To
- Options Available After Voluntary Administration Begins
- Common Mistakes Directors Make Before Seeking Help
- FAQs
Introduction
Many directors wait too long to seek advice because they fear the consequences of voluntary administration. Others act too early without understanding whether it is the right solution. Both approaches can create unnecessary risks. This blog explains when voluntary administration is appropriate, what the process involves, and how directors should respond.
When Should You Consider Voluntary Administration
| Risk Category | Key Warning Signs |
| Cash Flow | Inability to pay debts on time; forecasts no longer show viability. |
| Creditors | Increasing pressure from creditors; suppliers restricting or refusing credit. |
| Tax & Super | Falling behind on PAYG, GST, or Superannuation obligations. |
| Personal Risk | Directors are using personal funds to keep the business running. |
Early Insolvency Warning Signs
Common signs a business may be approaching insolvency include:
- Using new debt or credit facilities to pay existing liabilities.
- Repeated reliance on short-term funding, extensions, or informal payment arrangements.
- Inability to produce accurate, up-to-date financial records.
- Poor visibility over true financial position, including uncertainty around liabilities.
- Deferring employee entitlements, such as superannuation or accrued leave.
- Directors losing confidence in financial forecasts or recovery plans.
Unsure whether voluntary administration is approaching — or still avoidable?
Our VA: Director’s Checklist helps you assess warning signs, creditor pressure, and timing before risks escalate.
Directors’ Legal Duties when Insolvency Is at a Risk
Once insolvency is a real risk, directors must:
- Act in the best interests of the company as a whole, with greater regard for creditors.
- Avoid insolvent trading, including allowing the company to incur debts it cannot repay.
- Take reasonable steps to monitor the company’s financial position.
- Ensure financial records are accurate, complete, and up to date.
- Act with care and diligence in all financial decisions.
When to Seek Professional Advice & Whom to Speak To
Directors must seek professional advice when there’s uncertainty about the company’s solvency. In many cases, they can benefit from voluntary administration legal advice, particularly where personal liability or creditor pressure is increasing.
The most appropriate professionals to speak to include:
- An insolvency practitioner/voluntary administration advisor, who can assess solvency, explain voluntary administration, and outline restructuring or exit options.
- An insolvency or commercial lawyer, who can advise on directors’ duties, personal liability risks, and how decisions may be viewed legally.
- A trusted accountant or CFO, particularly where financial records or forecasts need clarification.
Not sure what to talk about when speaking to an adviser?
Our FREE checklist helps directors sense-check their position and prepare for informed conversations — without committing to administration.
Options Available after Voluntary Administration Begins
Here are the common outcomes at the end of voluntary administration:
- Deed of Company Arrangement (DOCA), allowing the business to continue trading under agreed repayment or restructuring terms
- Return of the company to directors, where debts are resolved or restructured
- Orderly liquidation, if the business can’t be saved
Voluntary administration also creates space to:
- Restructure debt
- Renegotiate contracts or leases
- Sell parts of the business
Common Mistakes Directors Make Before Seeking Help
Common mistakes directors make include:
- Waiting too long to seek professional advice
- Continuing to trade in the hope of a turnaround without evidence
- Using personal funds to prop up an unsustainable business
- Prioritising certain creditors over others
- Ignoring or underestimating early insolvency indicators
- Failing to keep proper financial records up to date
Another frequent issue is assuming voluntary administration is a last resort. By the time it is considered, options may already be limited.
These mistakes can also increase personal risk under the Corporations Act 2001 (Cth), particularly where debts continue despite insolvency risks.
Getting the right voluntary administration help early can offer more flexibility, give stronger outcomes, and reduce unnecessary risks for both the business and directors.
At Halo Advisory, we work for you — the director. Financial expert Greg Bartels offers a no-obligation, confidential conversation to help you understand where you stand, what risks exist, and what options are realistically available before deadlines reduce control. Get in touch today.
FAQs
How do I know if it’s time to get voluntary administration advice?
If you’re unsure whether the company can meet its obligations over the next few weeks, that’s usually the right time to seek advice.
Should I wait until creditors start legal action before getting advice?
No. By the time legal action starts, options are usually more limited and pressure is higher. Getting advice earlier gives directors more control and reduces the risk of reactive decisions.
Can I get advice without committing to voluntary administration?
Yes. Speaking to an insolvency adviser or lawyer does not force you into administration. The purpose of early advice is to understand your position and options before any formal step is taken.
Who should I speak to first if I’m unsure what to do next?
An insolvency practitioner or insolvency-focused lawyer is usually the best starting point. They can assess solvency risk and explain whether voluntary administration is appropriate or whether other options remain available.
What information should I prepare before seeking advice?
At a minimum, recent financial statements, current cash flow position, tax and superannuation status, and a list of major creditors. Having clear information allows advisers to give practical, relevant guidance quickly.
What if my accountant says things might improve soon?
Hope is not a strategy if the numbers don’t support it. Directors are expected to rely on realistic forecasts, not best-case assumptions. If recovery depends on uncertain events, it’s wise to get a second opinion.
Is getting advice early viewed negatively by creditors?
Generally, no. Early advice is often seen as responsible behaviour, particularly if it leads to better outcomes for creditors. Waiting too long is far more likely to cause concern.
What should I do immediately after receiving voluntary administration advice?
Take time to understand the advice and how it applies to your specific situation. This may involve refining forecasts, addressing urgent risks, or planning next steps — not necessarily appointing an administrator straight away.
What is voluntary administration and DOCA advice?
This type of advice focuses on whether a business can be restructured through a Deed of Company Arrangement (DOCA) rather than being wound up. It helps directors understand repayment proposals, creditor expectations, and whether a DOCA is a realistic outcome.
