Voluntary Administration Brief Summary

WHAT'S THE CAUSE?

  • Pressure from creditors in general; directors at personal financial risk from insolvent trading.
  • Pressure from banker or secured creditor.
  • Issue of Directors' Penalty Notices by the Australian Taxation Office.
  • Disputes between directors or shareholders.
  • Any legal action or event which may jeopardise the company.

WHAT'S IT ABOUT?

  • Can be used to save or restructure a financially troubled business.
  • Appointment usually by directors or secured creditor.
  • Administrators' powers are:
    • to control and trade-on business
    • to investigate the company's affairs
    • report to creditors on the company's affairs
  • Moratorium imposed on debt and guarantee enforcement during the voluntary administration.
  • At end of administration, company usually enters into a Deed with its creditors or is placed into liquidation.
  • If Deed prescribes that company will trade-on, control of company usually reverts to directors.

WHAT IT DOES!

  • Provides the company with breathing space to deal with creditors in an orderly manner and prepare proposal to give the best return to stakeholders.
  • Reduces the possibility of secured creditor proceeding against the assets of the company.
  • Allows independent person to review the company's affairs and deal with the pressures of creditors.
  • May allow company to stay out of liquidation.
  • Can often be used where directors' penalty notices for taxation are pending reducing the risk of personal liability upon directors.
  • If Deed approved, will eliminate possible insolvent trading claim.