Voluntary Administration

Voluntary Administration is an insolvency process where the directors of a financially-troubled company, or a secured creditor with security over most of the company’s assets, appoint a voluntary administrator.

The Corporations Act 2001 (Cth) provides that the objective of the voluntary administration process is to:

• maximises the chances of a business to continue to exist; or
• results in a better return for the company’s creditors and members, than from an immediate winding up of the company

The Voluntary Administration process provides a flexible statutory framework to enable a company time to consider entering into an arrangement with its creditors to compromise its debts. Such an arrangement is structured to save the company, the business and jobs while maximising the return to creditors.

The administration process enables:

• the Voluntary Administrator to take full control of company’s operations; review the company’s affairs; and deal with its creditors
• time to deal with creditors in an orderly manner and for the directors to prepare a proposal to give the best return to stakeholders
• the company to stay out of liquidation whilst the creditors consider accepting the directors’ restructure proposal

Upon appointment, the Voluntary Administrator takes control of the company’s assets and affairs and is the only one with the power to bind the company. The Voluntary Administrator will:

• trade the company’s business if appropriate;
• identify, secure and realise the company’s assets; and
• conduct preliminary investigations into insolvent trading, preferential payments and other voidable transactions.

The Voluntary Administrator will then report to creditors on the company’s business, property, affairs and financial circumstances and provide their opinion to creditors on whether the company should:

• enter into a Deed of Company Arrangement;
• be liquidated; or
• have control of the company returned to its directors.

Deed of Company Arrangement

A Deed of Company Arrangement allows a stricken company to come to a cost-effective formal arrangement with its creditors to try to remedy its financial problems without having to liquidate the company. Deeds of Company Arrangement can involve contributions from future profit; director and/or third party contributions; and debt deferral.

AMB Insolvency can assist directors in formulating the best possible Deed of Company Arrangement that results in the best possible outcomes for the company; directors; employees, creditors; and shareholders.