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Voluntary Administration FAQs

How Long does Voluntary Administration Last?

The Administrator must submit their report to the creditors 5 weeks from the date of their appointment. For more complicated cases, this timeframe can be extended.

Why Enter Voluntary Administration?

Voluntary Administration provides much-needed breathing room for companies in financial difficulty. During the Voluntary Administration period, your creditors must stop their collection activities. Your administrator will also look at your company structure to see if it can be saved. The Administrator might find the company is heading towards insolvency.

If your company is only in short-term financial trouble, Voluntary Administration is the best solution for you.

How do I Start Voluntary Administration?

To enter Voluntary Administration, the Directors must pass a resolution in a Board meeting. They must then present the vote in writing and appoint an administrator.

How Much does a Voluntary Administration Cost?

Each Administration is different so there is no one answer. The cost of the Voluntary Administration will depend on:

  • the size of the company
  • the complexity of the financial hardship
  • the number and type of creditors
  • the work that needs to be performed.

What is the difference between a Voluntary Administration and a Liquidation?

A voluntary administration and liquidation are both formal insolvency procedures available to financially distressed Companies. The voluntary administration process is designed to give a Company the chance to rehabilitate and to preserve the value of the business. A liquidation generally represents the end of the Company and will generally result in the Company being deregistered.

What are the possible outcomes from a Voluntary Administration?

The creditors of the Company will vote to determine the future of the Company at the second meeting of creditors. The options available to creditors are:

  • To execute a Deed of Company Arrangement (DOCA)
  • To end the administration and return of control of the Company and Director(s)
  • To wind the Company up and appoint a Liquidator

What is a Deed of Company Arrangement (DOCA)

A DOCA is a binding arrangement between a Company and its creditors governing how the Company’s affairs will be dealt with. Generally, a DOCA aims to:

  • Maximise the chances of a company, or as much as possible of its business, continuing, and/or
  • Provide a better return for creditors than an immediate winding up of the company.

What happens to employees and their entitlements in a Voluntary Administration?

Appointing a Voluntary Administrator does not automatically result in the termination of employees, an Administrator may continue to trade the business and employ in the ordinary course. If employees are owed wages and unpaid entitlements for periods prior to the appointment of an Administrator the voluntary administration won't generally deal with those debts. That will depend on what is decided at the second meeting of creditors. If a DOCA is executed, employees will be paid in accordance with the terms of the DOCA, if control of the Company is returned to the Director/s they will be responsible for meeting employee entitlements, if the Company is placed into liquidation, employees will be treated as priority unsecured creditors. They may also be eligible to have their entitlements paid through the Government’s Fair Entitlement Guarantee Scheme (‘FEG’).

What happens to employees and their entitlements in a Voluntary Administration?

Appointing a Voluntary Administrator does not automatically result in the termination of employees, an Administrator may continue to trade the business and employ in the ordinary course. If employees are owed wages and unpaid entitlements for periods prior to the appointment of an Administrator the voluntary administration won't generally deal with those debts. That will depend on what is decided at the second meeting of creditors. If a DOCA is executed, employees will be paid in accordance with the terms of the DOCA, if control of the Company is returned to the Director/s they will be responsible for meeting employee entitlements, if the Company is placed into liquidation, employees will be treated as priority unsecured creditors. They may also be eligible to have their entitlements paid through the Government’s Fair Entitlement Guarantee Scheme (‘FEG’).

Is Government’s Fair Entitlement Guarantee Scheme (‘FEG’) assistance available to employees whose employer is in Voluntary Administration?

No. FEG assistance is only available to those employees whose employer is in liquidation.

Can Director’s avoid personal liability through a Voluntary Administration?

Appointing a Voluntary Administrator can limit the Director’s civil or criminal liability for insolvent trading, however it does not extinguish liability for debts incurred whilst the Company was insolvent prior to the appointment of the Administrator if the Company is placed into liquidation. During the Voluntary Administration period creditors with personal guarantees can generally not commence proceedings against the Director, however once the Voluntary Administration process is completed creditors who hold personal guarantees are entitled to seek to recover amounts from the Director. The Voluntary Administration will not extinguish ‘lockdown’ or already expired DPN’s.

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