Voluntary Administration and What this Could Mean for Your Business

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Voluntary administration and what this could mean for your business

Most people view voluntary administration as another form of liquidation. However, this is not the case. In fact, voluntary administration is a procedure that allows an essentially insolvent company to access financial expertise and potentially save the company from liquidation or provide a better return to creditors (and members) than if there were an immediate liquidation of the company. As suggested by the name, voluntary administration is typically initiated by the company, such as by its directors. In other circumstances, a secured creditor or a Liquidator may also be able to initiate this process.

Voluntary administration allows the appointed administrator to continue to trade the company’s business and sell company assets so as to maximise the company’s chances for a successful turnaround. Importantly, the administrator is personally liable for any debts incurred by the company during the administrative period. This is intended to encourage suppliers, employees, and customers to continue to trade with the company despite being in voluntary administration.

At the completion of the administration period, the administrator may recommend that the company:

  1. Be returned to the directors of the company;
  2. Be wound up in liquidation; or
  3. Enter into a Deed of Company Arrangement (‘DOCA’) to repay some, or all, of its debts.

Disclaimer: This publication is intended for general and informative use only and is not to be relied upon as professional financial or legal advice.

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