Do you need Voluntary Administration?

What is Voluntary Administration

Voluntary administration (VA) is an insolvency procedure that aims to appoint an external administrator, known as a voluntary administrator, as quickly as possible in order to resolve the future of a company experiencing extreme hardship. A VA is usually initiated by the company director (in efforts to ensure the businesses survival) as soon as they suspect that their company is insolvent or may become insolvent.  If, however, a businesses survival is no longer a viable option, the voluntary administrator is appointed to assist in providing better returns for the company’s employees, investors, shareholders, and creditors. The standard duration for voluntary administration is roughly 25 – 30 business days. Upon the finalisation of voluntary administration, the company will enter into a “Deed of Company Arrangement (DOCA) with its creditors, alternatively, it may be placed into liquidation. 

Voluntary Administration should not be confused with liquidation. The purpose of VA is different from that of liquidation. The sole purpose of liquidation is to wind the company up effective immediately. Voluntary administration is appointed when the company’s director believes there is still a possibility for the business to return to trade.

When is Voluntary Administration required?

• In any scenario where the company directors suspect that their company is trading insolvent or likely to become insolvent in the near future.
• If a secured creditor who is entitled to enforce a security interest over the company’s property appoints a voluntary administrator, due to concern.
• Whenever there are pressures from creditors demanding payments for debts and company directors are at personal financial risk of insolvent trading.
• Whenever there are pressures from the banks or secured creditors demanding payment which the company can not make.
• Whenever there are disputes between directors or shareholders.
• Whenever any legal action or event occurs that may threaten the company.

What Outcomes Can You Expect After Voluntary Administration?

• Allows the company grace periods to deal with all creditors in a strategic and thought out manner that ensures better returns for stakeholders.
• Voluntary Administration may allow a company to stay out of liquidation altogether.
• An external party may be appointed to review the company & coordinate all deals under pressure with the creditors involved.
• Generally reduces the likelihood of creditors proceeding against the assets of the company or company director.
• Upon completion, the company usually enters into a Deed of Company Arrangement (DOCA) with creditors or it is placed into liquidation
• In any instance where the DOCA states that the company will continue to ‘trade-on’, the control of the company is usually returned to the company directors.
• In the instance when the DOCA is also approved by creditors, it will eliminate all possible insolvent trading claims.
• In the instance when a DOCA cannot be produced, the company is placed into liquidation.

How Can Lawrence Group Help?

Lawrence Group is skilled in assessing your business’ financial position allowing us to provide tailored solutions for your personal situation. We understand corporate insolvency and how voluntary administration can induce long term effects on not only the owners and directors of a company but also the employees, creditors, and shareholders, and we work with you to provide solutions that will make an uncertain time as stress-free as possible for all parties involved.

Lawrence Group has extensive experience in voluntary administration matters across a range of industries. Our expert team is here to provide your company with the support, advice, and knowledge necessary to help you find the best possible outcome for everyone.

This article is general information only. It does not give business, accounting, taxation, financial planning or other professional advice or service. It does not consider your specific situation, objectives or needs and if personal advice is required, a detailed analysis of your particular circumstances would need to be sought. Please see our Privacy and Disclaimers page for further information.