Voluntary administration

Voluntary administration is a pause button for a company in serious financial trouble. An outside expert, called the administrator, steps in, takes control of the business and its property, and reports to creditors on whether the company can survive, should do a deal with them, or should be wound up.

It applies to companies, not sole traders or partnerships. The administrator must be a registered liquidator and independent of the company.

Why would directors choose it?

Directors have a duty not to let a company keep trading while insolvent. When the money clearly won’t stretch to pay debts as they fall due, administration offers a way to act before a creditor forces the issue, for example after a statutory demand or a winding-up application.

The appeal is breathing space. During administration, unsecured creditors can’t start or continue legal action against the company without the administrator’s agreement or the court’s permission. Landlords and equipment owners generally can’t take back property the company is using. And since 2018, many suppliers can’t terminate a contract merely because the company has entered administration.

What happens, and when?

ASIC’s guide for creditors sets out the timeline:

Stage	Timing	What happens
Appointment	Day one	The administrator takes control from the directors
First creditors’ meeting	Within 8 business days	Creditors can replace the administrator and form a committee
Inquiries and recommendation	Ahead of the decision meeting	The administrator reviews the company’s affairs and recommends an outcome
Second creditors’ meeting	Within 25 business days (30 around Christmas or Easter)	Creditors vote on the company’s future

Courts can extend these periods, which happens with larger or messier companies.

The three possible endings

At the second meeting creditors choose one of three paths:

1. A deed of company arrangement (DOCA). A legally binding compromise, typically where creditors accept a portion of their debts, paid in a lump sum or instalments, sometimes funded by a director or a third party. It binds unsecured creditors even if they voted against it.
2. Handing the company back to the directors. Rare, as it only suits a company that turns out to be solvent.
3. Liquidation. The company is wound up, usually with the administrator becoming liquidator.

Why it matters in business lending

For lenders, voluntary administration shows up in three places.

Existing loans. A secured lender with a general security agreement over all or nearly all of the company’s assets has a short window to enforce or can appoint the administrator itself. Other secured lenders are generally held off. A lender holding a director guarantee can’t pursue it during the administration without leave of the court, but the guarantee survives a DOCA.

Funding a DOCA. Directors who want to keep the business sometimes contribute money to a DOCA proposal. Where that money comes from home equity, it’s a personal or business-purpose property loan judged mainly on the property offered and how the borrower intends to clear it.

Borrowing afterwards. Lenders will ask about any past administration involving you as a director. A company that came through a DOCA and has traded steadily since can still find finance, particularly against property.

If you’re a director weighing up what comes next and property equity could be part of the answer, talk to us about your position before any decision is locked in.

An example

A Newcastle civil contractor loses a major client mid-project and can’t meet a large tax debt and supplier invoices. The directors appoint an administrator. Over the next five weeks, work continues on profitable jobs, the administrator investigates, and one director proposes a DOCA funded partly by a loan against their investment property. Creditors vote for the deed, the company is returned to the directors’ control on the deed’s terms, and it keeps trading under a tighter budget.

Not every administration ends this way. Many become liquidations. Directors who seek advice early, from a registered liquidator or their accountant, tend to keep more doors open.

Related terms

• Administrator: the registered liquidator who runs the process
• Liquidation: winding up a company and selling its assets
• Small business restructuring: a lighter process where directors stay in control
• Insolvency: being unable to pay debts when they fall due

ASIC also publishes separate guidance for employees and for directors. Our longer guide to voluntary administration walks through the director’s side.

Facing a funding decision after a hard stretch?

We speak with directors in tough spots often, and we don’t treat a rough patch as a full stop. Whether you need money to back a rescue plan or a fresh start after one, the realistic options usually turn on property security and a believable plan to repay.

Our form asks for around sixty seconds. Your credit score isn’t touched by sending it, and the details you give go to us alone, not out to a long chain of lenders. A real person studies your position and then calls you for a straight conversation. The more candid you are about the administration and current debts, the quicker we can point you somewhere that will actually say yes.

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