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VOLUNTARY ADMINISTRATION

Acting early and taking control can give you greater insight in achieving the best outcomes.
Being placed into administration by formal appointments can be a difficult operation.

Our 4 Step Approach

The Corporations Act, ATO regulations and a number of other laws combined with the commercial realities mean directors need some assistance in working out a turnaround strategy. Placing the company into voluntary administration parachutes a turnaround expert into the business who takes the legal responsibility temporarily away from you. There are many advantages undertaking a formal turnaround through a voluntary administration when there are no other alternatives. Talk to TPH and find that strategy immediately.

Voluntary Administration

The TPH team are qualified, registered and highly experienced Voluntary Administrators offering an extremely efficient and effective program tailored to manage all types of companies and industries.

The unique Voluntary Administration Services that TPH offer include:

  • Consultation and strategy development with directors, senior management and advisers prior to any appointment taking place;
  • Highly competitive hourly fee rates;
  • Fixed fees for many engagements;
  • Working with the directors and staff after appointment;
  • Adopting many of the existing company practices and procedures whilst running the company during the engagement; and
  • Working with management in the formulation of logical and workable Deeds of Company Arrangement.

TPH sees the Voluntary Administration process as a flexible and powerful reconstruction and management process, that when used and implemented in the right situations can produce extraordinary results for financially distressed companies.

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Deed Of Company Arrangement (DOCA)

TPH offers Deeds of Company Arrangement Services in conjunction with its Voluntary Administration service.

A DOCA is a binding arrangement between a company and its creditors governing how the company’s affairs will be dealt with.

One of the strongest tools in a DOCA
is that creditors agree to accept less than what they are owed and mostly it is
a lot less than what they are owed.

The TPH team are qualified, registered and highly experienced DOCA Administrators offering an extremely efficient and effective program tailored to manage all different types of companies and industries.

The unique DOCA Services that TPH offer include:

  • Strategy development with directors, senior management and advisers to formulate logical, effective DOCAs;
  • Highly competitive hourly rates;
  • Fixed fees in most instances; and
  • Logical engagement with specialist lawyers to assist in preparation of DOCA documentation.
  • Effective and efficient implementation of DOCAs terms and conditions
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Voluntary Administration To Liquidation

There are many instances where a Voluntary Administration is commenced with the ultimate aim to place the company in Liquidation. TPH will advise when to use a Voluntary Administration to advance to a DOCA and when to advance to a liquidation.

TPH provides its unique services by:

  • Providing strategic advice as the voluntary administration unfolds;
  • Working with the company to arrive at the best outcomes for the business, its employees, creditors, lenders, shareholders and directors;
  • Transitioning the company from VA to CVL with minimum costs.
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Frequently asked questions

Voluntary administration is a type of insolvency process for struggling businesses. It starts when an external administrator is appointed to take control over a company and investigate its affairs. Voluntary administration offers a chance for a company to hit pause and have a temporary break from most types of creditor actions. It’s also a way for directors to avoid insolvent trading without putting the company into liquidation right away.

The administrator will identify the best course of action for the company, ideally to save the company or at least the business of the company. If the business can’t be saved, then the administrator will recommend either a DOCA or Liquidation. The creditors then vote on the administrator’s recommendation.

The three possible outcomes of voluntary administration are returning the company to the control of the directors, entering into a deed of company arrangement, or liquidation. Typically voluntary administrators are appointed by company directors when they’re concerned the company is likely to become insolvent or is already insolvent.

The voluntary administrator is an external expert brought in to manage the voluntary administration process. The voluntary administrator must be a registered liquidator with ASIC in order to be eligible for an appointment. His/her duties include taking over the legal responsibility from the director  , investigating the company’s finances and operations, and making recommendations, which may include a plan to help save the company or for the best outcome for creditors.

The administrator will hold creditors’ meetings to keep them informed and allow them to vote on recommendations, provide reports on his/her investigations, and carry out the decision from the creditors’ vote. This could be returning control to the company’s directors , executing a deed of company arrangement Which also returns control to the directors)  or liquidation.

Voluntary administrators are appointed by directors (95%)  but occasionally by creditors, or a court. He/she has all the powers of the company’s directors, including the power to sell assets in the lead-up to the vote by creditors. Also, the administrator might report to ASIC on any evidence of fraud or offences by people involved in the company.

To speak with the expert administrators of a TPH Advisory, contact us today.

While voluntary administrators must be registered liquidators with ASIC, the role of the liquidator is different to the role of a voluntary administrator. The liquidator’s key focus is realising the company’s assets, paying the proceeds to creditors, and winding down the company. In contrast, the voluntary administrator is charged with finding the best possible option moving forward for saving the business of the company and failing that, the best outcome for creditors.

If the creditors vote for the company to go into liquidation at the end of the voluntary administration process, a liquidator will then be appointed.

By law, voluntary administrators must be on ASIC’s register of liquidators. Voluntary administrators are usually appointed (chosen) by a company’s board of  directors(95% of cases) . Sometimes, though less commonly, voluntary administrators are appointed by a liquidator or provisional liquidator (who thinks the company has a chance of survival and can be saved), a secured creditor, or a court.

The voluntary administrator must be independent. They need to disclose any relevant relationships they might have with the directors/shareholders/related parties and even creditors. To be independent means not to be biased to any person or group or have close personal or business relationships with anyone involved in insolvency. It also includes things like conflict between personal or business circumstances with duties as external administrator.

Also, the party appointing the creditor might look for highly experienced administrators with professional memberships like Chartered Accountants Australia. At a practical level, directors usually need to meet a candidate and work out if that person will be the right person for the role. It’s a very significant decision.

If you’re an employee, you will more often than not  be paid your outstanding wages,  and leave entitlements after  the voluntary administration has run its course (usually about 5 weeks). It could take another 2 to 3 months to actually get paid. How and when you’ll be paid will depend on the outcome of the voluntary administration.. Wages due to you during the voluntary administration process is the administrator responsibility if the company keeps trading in the interim.

Administration can result in three possible outcomes.

First,  if the company goes into liquidation, you will get paid some of, if not all, all of your wages and benefits from either the liquidator or the  government’s Fair Entitlements Guarantee.

Second, under a deed of company arrangement  your entitlements are generally paid however sometimes the terms of the Deed will alter that outcome. Most Deeds however provide for entitlements to be paid. Third, , if the company returns to trading under the control of the directors, the company directors will be responsible for paying your wages. Returning the company to the directors happens rarely.

The administrator works to strict time frames for certain milestones and a voluntary administration will typically last for around five to eight weeks. For example, once he/she is appointed, the administrator needs to call the first creditors’ meeting within eight business days and the second creditors’ meeting within 25 or 30 business days of appointment. That second meeting can be adjourned to extend the timeframe of the Voluntary Administration.

Once the creditors’ vote (for liquidation, deed of company arrangement, or control to revert back to the company directors) and the chosen option is finalised, the voluntary administration effectively comes to an end. Certain things – like the company having up to 15 days to sign a a deed of company arrangement – can shorten or lengthen the administration process by days or weeks.

What is the difference between voluntary and involuntary administration?

Technically there is not an involuntary administration. However a voluntary administration can be commenced by a secured creditor of the court. Some commentators refer these last two appointments as involuntary administrations as the directors had no say in it. 

In both cases, the parties seeking voluntary administration are usually doing so because the company’s insolvent or likely to be insolvent.. Either type of administration could result in three possible outcomes as voted on by the creditors: a deed of company arrangement, liquidation, or more rarely, return to trading to company directors.

Voluntary administration and liquidation are both insolvency procedures that could or will result in a winding-up, but they’re completely different processes. Voluntary administration gives companies a chance to rehabilitate while liquidation in most cases represents the end for companies through winding up and eventual deregistration.

With voluntary administration, an external administrator is appointed, and he/she will investigate the company to make a recommendation as to the best option. Whether that’s a deed of company arrangement, liquidation, or resuming trading under the control of the company directors, the creditors will vote before the voluntary administration ends. Liquidation also is technically an external administration but it usually means the company is already committed to a winding-up.

So the key difference between the two is liquidation typically means it’s the end for the company while with voluntary administration a company avoids liquidating right away and still has a chance at rehabilitating, though liquidation itself is one of the three possible outcomes.

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