A voluntary administrator is an independent insolvency professional appointed to take control of a company in financial distress. They assess the business, manage the voluntary administration process, and guide creditors in deciding whether the company should be restructured, returned to directors, or placed into liquidation.
Free eBook: Before Meeting the Voluntary Administrator Guide: What to Prepare, What to Ask
On This Page
- Introduction
- Who Is a Voluntary Administrator?
- Who Can Appoint a Voluntary Administrator?
- Roles and Powers of an Administrator
- What Happens Once an Administrator Is Appointed?
- Common Misconceptions About Voluntary Administrators
- Next Steps for Directors
- FAQs
Introduction
When a company enters voluntary administration, the voluntary administrator plays a central role in the process. Yet many directors are unsure who a voluntary administrator is and what they do.
The role is often misunderstood. Some assume the administrator is appointed to shut the business down. Others believe they act on behalf of directors or individual creditors.
In reality, a voluntary administrator is an independent professional appointed to take control of the company, assess its financial position, and guide creditors toward the best available outcome.
This article explains their role, how they are appointed, what happens once they take control, and what directors should expect next.
Wondering what does voluntary administration mean? Read our pillar blog What Does Voluntary Administration Mean? A Guide for Directors for a detailed overview of the voluntary administration process.
Who Is a Voluntary Administrator?
A voluntary administrator is a licensed insolvency practitioner appointed under the Corporations Act 2001 (Cth).
They must be registered in accordance with ASIC standards. More importantly, a voluntary administrator must act independently. They do not represent directors, shareholders, or individual creditors.
Once appointed, the administrator’s primary duty is to assess the company’s financial position and determine whether there is a better outcome available than immediate liquidation.
Preparing to speak with a voluntary administrator?
Our Voluntary Administrator Meeting Guide helps you understand what information to prepare, what questions to ask, and what to expect from the first conversation.
Who Can Appoint a Voluntary Administrator?
A voluntary administrator can be appointed by:
- The directors upon board resolution
- A secured creditor who holds a security interest over the whole, or substantially the whole, of the company’s property
- A liquidator, if a company is already being wound up
Regardless of who makes the appointment, the voluntary administrator must act independently.
Roles and Powers of an Administrator
Immediately upon appointment, the administrator takes control of the company’s affairs. Their role includes the following powers:
- Control: The administrator assumes the role of the company’s agent and is the only person who can deal with the company’s property.
- Investigation: They are required to investigate the company’s business and financial circumstances to decide the best path forward for creditors.
- Suspension of Director Powers: While the administration is active, company directors generally cannot exercise their powers without the administrator’s written approval.
What Happens Once an Administrator Is Appointed?
Once the company has an administrator appointed, the voluntary administration process formally begins.
Here’s an overview of the voluntary administration process:
Suspension of Director Powers
Control of the company shifts from the directors to the voluntary administrator. Directors remain in place, but their powers are suspended. The administrator takes responsibility for managing the company and making key decisions.
At the same time, most creditor enforcement action against the company is paused, giving the administrator time to assess the situation.
First Creditors’ Meeting
The administrator must convene the first creditors’ meeting within 8 days of appointment.
At this meeting, creditors may:
- decide whether to replace the administrator
- decide whether to form a committee of inspection
The meeting does not decide the company’s future. Its purpose is procedural and administrative.
Review and Investigation
The administrator then reviews the company’s affairs. This typically involves:
- examining assets, liabilities, and cash flow
- reviewing financial records and key contracts
- assessing whether the business is viable
- investigating significant transactions and risks
This review forms the basis for the administrator’s recommendations.
Final Meeting & Discussion of Outcomes
At the second creditors’ meeting, creditors decide the company’s future. The options are:
- return control of the company to directors
- enter a Deed of Company Arrangement (DOCA)
- place the company into liquidation
The outcome depends on the company’s financial position, viability, and creditor support.
Relevant read:
Want to be prepared before that first conversation?
Common Misconceptions About Voluntary Administrators
There are several common misunderstandings about the role of a voluntary administrator that can add unnecessary concern for directors. Understanding these helps them approach voluntary administration with clearer expectations and fewer assumptions.
Myth: Voluntary administration means the end of the business.
Reality: Voluntary administration does not automatically mean the business will close. It is a formal process designed to assess whether the company can continue, be restructured, or achieve a better outcome than immediate liquidation.
Myth: Directors lose all involvement once an administrator is appointed.
Reality: While control shifts to the voluntary administrator, directors are not removed. They are expected to assist, provide information, and work with the administrator, particularly in assessing viability and developing any proposed Deed of Company Arrangement (DOCA).
Myth: The business must stop trading during voluntary administration.
Reality: A business can continue trading during voluntary administration if the administrator considers it appropriate. One purpose of the process is to provide temporary relief from creditor pressure so the company’s position can be assessed without immediate enforcement action.
Myth: Voluntary administration is only for large companies.
Reality: Voluntary administration is available to companies of all sizes. It is used by small, medium, and large businesses where insolvency or near insolvency needs to be addressed in a structured way.
Myth: Directors become personally liable for all company debts.
Reality: Directors are not automatically personally liable for company debts simply because the company enters voluntary administration. Personal liability may arise from personal guarantees, insolvent trading, or certain tax obligations, but voluntary administration itself does not create personal liability. Read Are Directors Personally Liable for Company Debt?
Next Steps for Directors
If voluntary administration is being considered, the priority for directors is understanding the process before any appointment is made.
Here’s a practical voluntary administration checklist to consider your next steps:
- consider whether alternative options remain available (restructuring, safe harbour)
- assess the company’s current financial position (including cash flow, accuracy of records)
- understand the level and urgency of creditor pressure
- clarify what voluntary administration would involve in practice
An early conversation with a qualified adviser can help directors understand the role of a voluntary administrator, the likely process, and the potential outcomes. Seeking advice does not commit the company to voluntary administration, but it can help directors make informed decisions before options narrow.
At Halo Advisory, we work for you — the director. Financial expert Greg Bartels offers a no-obligation, 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
Is a voluntary administrator the same as a liquidator?
No.
- A voluntary administrator is appointed to assess the company’s position and recommend the best available outcome for creditors.
- A liquidator is appointed to wind up the company and realise its assets. Voluntary administration may lead to liquidation, but they are separate roles and processes.
More: Voluntary Administration vs Insolvency vs Liquidation: What’s the Difference? [link to blog ‘Blog – Voluntary Administration vs Insolvency vs Liquidation
Does the voluntary administrator work for directors or creditors?
The voluntary administrator works independently. They do not act for directors, shareholders, or individual creditors. Their duty is to act in the interests of creditors as a whole.
Can directors choose the voluntary administrator?
In most cases, yes.
However, once appointed, the administrator acts independently and is not controlled by the directors. Creditors may later vote to replace the administrator at the first creditors’ meeting.
Can the business keep trading during voluntary administration?
Yes, if the administrator considers it appropriate. One purpose of voluntary administration is to provide temporary relief from creditor enforcement while the administrator assesses the business. Trading may continue if it helps preserve value or assess viability.
Are directors personally liable once an administrator is appointed?
Not automatically. Voluntary administration does not create personal liability for directors. However, liability may still arise from matters such as personal guarantees, insolvent trading before the appointment, or certain tax obligations.
More: Directors’ duties | ASIC
What is a Deed of Company Arrangement (DOCA)?
A Deed of Company Arrangement (DOCA) is a formal agreement between a company and its creditors, usually proposed during voluntary administration. It sets out how the company’s debts will be dealt with, which may involve restructuring, compromises, or staged repayments instead of liquidation.
Does appointing a voluntary administrator stop ATO action?
In most cases, yes, temporarily. Voluntary administration generally pauses unsecured creditor enforcement action, including recovery action by the ATO, while the process is underway. However, the ATO remains a key creditor and participates in the process.
What is a notice of intention to appoint administrators?
A notice of intention to appoint administrators (NOI) is a formal document filed by directors or a secured creditor indicating that an administrator is about to be appointed. It provides short-term protection by temporarily restricting creditor enforcement while the appointment is being finalised.
