A company enters voluntary administration when a voluntary administrator is appointed to the company, generally by a company’s directors (or a liquidator or secured creditor), after they decide that the company is insolvent or likely to become insolvent.
Voluntary administration was introduced in Australia in 1993, and is relatively popular – in the FY 2016-17, of the 8,031 companies entering into external administration, 15% of those were voluntary administrations.
Voluntary administration is a wholly legislative form of intervention – its procedure, practice, and purpose are codified in Pt 5.3A of the Corporations Act 2001 (Cth).
The aim of voluntary administration is to assess the processes and financial prospects of a company with a view to continuing a company’s operations (if feasible)
In a voluntary administration, the voluntary administrator (an independent, qualified outsider) takes control from the directors and has full power over the company to determine its future. The voluntary administrator will use their position to gain an understanding of the company’s assets, liabilities and business prospects. Following their review, the voluntary administrator will do one of three things:
- Place the directors back in control; or
- Implement a deed of company arrangement; or
- Put the company into liquidation.