This type of administration was introduced to encourage directors of insolvent companies to take early action and is a mechanism for companies facing financial distress to obtain a “breathing space”. It also provides directors with protection from personally guaranteed corporate debts during the period of the Voluntary Administration period.

During the Voluntary Administration process, there is a moratorium period of approximately 5 weeks (six weeks at Christmas and Easter) in which creditors, subject to a number of exceptions, are prohibited from taking any action against the company to recover debts, enforce charges or have the company wound up without the consent of the either the Administrator or the Court.

The Administrator will convene two meetings of creditors during the administration:

  • The first meeting will be held within 8 business days of the Administrator’s appointment at which creditors may vote to replace the Administrator and/or appoint a Committee of Creditors; and
  •  The second meeting of creditors will be held within 25 or 30 business days after the  Administrator’s appointment at which creditors may vote to decide the Company’s future.

The Administrator’s role is to take control of the affairs of the business, investigate the financial affairs of the company, report the findings and recommend to creditors one of the following three courses of action:

  1. That the administration cease (and control of the company be returned to the directors);
  2. That the company enter into a Deed of Company Arrangement; or
  3. That the company be wound up in insolvency.

A Deed of Company Arrangement or DOCA as it is often referred to, can best be thought of as a contract between the company and its creditors to allow the company to restructure and trade out of its financial problems. Creditors may vote to accept a Deed of Company Arrangement put forward by the company and/or its directors as an alternative to liquidation. 

Often the Deed of Company Arrangement will ask creditors to compromise their claims. The terms of a Deed of Company Arrangement can be very flexible; however, it should offer creditors a better return than the alternative of liquidation. Ultimately the creditors must decide whether or not to accept a Deed of Company Arrangement that is proposed.

For further information on this type of administration and a timeline of the process, please click here.

If you wish to contact Shaw Gidley to make an enquiry regarding voluntary administration, please use the enquiry form on the right and one of our Corporate Insolvency Services Team will respond to you in the near future.

With Offices in Newcastle, Central Coast and Port Macquarie, Shaw Gidley is your bankruptcy, liquidation and insolvency specialists.