Voluntary administration is a formal process where an independent registered liquidator, called the voluntary administrator, takes full control of a struggling company to try to save the company or its business. Creditors usually vote on the company's future about five weeks after the appointment. Liquidation is different because it winds the company up. Small business restructuring is different because eligible small companies keep their directors in charge while they put a debt plan to creditors.
What is voluntary administration?
Voluntary administration is one of the main forms of "external administration" for companies under the Corporations Act 2001. ASIC describes it as a process designed to resolve a company's future direction quickly.
Once a company enters voluntary administration, the administrator takes full control. They have all the powers of the company and its directors. That includes the power to sell or close the business, or sell individual assets, before creditors decide what happens next.
Directors cannot use their powers while the company is in voluntary administration. They must still help the administrator, for example by handing over the company's books and records.
Who can put a company into voluntary administration?
Most often it is the directors. The board resolves that the company is insolvent, or likely to become insolvent, and that an administrator should be appointed. Before the appointment, the directors need a registered liquidator's written consent to act as voluntary administrator.
Less commonly, a liquidator or provisional liquidator already appointed to the company can appoint a voluntary administrator.
Voluntary administration steps and timeline
The law sets tight deadlines, counted in business days from the appointment. Here is how the process usually runs, based on ASIC's guide for creditors.
- Appointment. Voluntary administration starts when the administrator is appointed. They take control and start looking into the company's business, property, affairs and finances.
- First creditors' meeting. This must be held within 8 business days of the appointment, with at least 5 business days' notice, unless the court allows more time. Creditors can replace the administrator at this meeting if another registered liquidator has agreed to act. A committee of creditors may also be formed.
- Investigation and report. The administrator investigates the company's affairs and reports to creditors on the options. If there is a proposal for a deed of company arrangement, the administrator also gives a statement about it.
- Second creditors' meeting. This must be held within 25 business days of the appointment, or 30 business days if the appointment is around Christmas or Easter, unless the court extends the time. The report and statement must reach creditors at least 5 business days before the meeting.
- The decision. Creditors vote on what happens to the company. ASIC says this meeting is usually held about five weeks after the appointment, or six weeks around Christmas or Easter.
What can creditors decide at the second meeting?
Creditors choose one of three outcomes:
- A deed of company arrangement (DOCA). A DOCA is a binding arrangement between the company and its creditors that sets out how the company's affairs will be dealt with. Directors or third parties usually propose it, often after talking with the administrator. Creditors who accept a DOCA can also choose the deed administrator.
- Liquidation. The company is wound up. The voluntary administrator usually becomes the liquidator, but creditors can vote, by a majority in number and value, to appoint a different registered liquidator.
- Return to the directors. The administration ends and the directors take back control. ASIC has said creditors choose this only in very rare circumstances.
Voluntary administration vs liquidation
The big difference is the goal. Voluntary administration is a short, structured pause to work out whether the company or its business can be saved. Liquidation is the end of the company.
In a liquidation of an insolvent company, an independent registered liquidator takes control so the company's affairs can be wound up in an orderly and fair way for creditors. There are two types: creditors' voluntary liquidation and court liquidation. A creditors' voluntary liquidation often starts when creditors vote for it at the end of a voluntary administration or after a DOCA is terminated.
A liquidator's job includes:
- protecting, collecting and selling the company's assets
- looking into unfair preferences, uncommercial transactions and possible insolvent trading claims against officers
- looking into why the company failed and reporting possible offences to ASIC
- paying out money after the costs of the liquidation, with some employee entitlements paid ahead of other unsecured creditors
Once a company is in liquidation, unsecured creditors cannot start or continue legal action against it unless the court allows it.
Voluntary administration vs small business restructuring
Small business restructuring (SBR) is a simpler process for smaller companies. The key difference is control. In voluntary administration and liquidation, directors lose control of the company. When directors appoint a restructuring practitioner, they keep running the business while a restructuring plan is prepared and put to creditors.
To be eligible, on the day the restructuring practitioner is appointed the company's total liabilities must not exceed $1 million. The other conditions include:
- employee entitlements that are due and payable, including super, have been paid
- tax lodgements are up to date
- neither the company nor its directors have used SBR or simplified liquidation in the past 7 years
The restructuring proposal period generally lasts 20 business days from the start, unless it ends earlier or is extended. All admissible debts and claims rank equally under a restructuring plan. Only a registered liquidator can act as a restructuring practitioner. You can read the full details on ASIC's small business restructuring page.
This table sets the three processes side by side.
| Process | Who runs company | Who can use it | Main aim |
|---|---|---|---|
| Voluntary administration | The administrator | Insolvent or nearly insolvent companies | Save the company or business |
| Liquidation | The liquidator | Companies being wound up | Close the company fairly |
| Small business restructuring | The directors | Eligible companies, liabilities up to $1 million | Agree a debt plan with creditors |
Who can be appointed as a voluntary administrator?
Only a registered liquidator can be appointed as an external administrator of a company. That covers voluntary administrators, liquidators, deed administrators and restructuring practitioners.
A registered liquidator is a person registered under the Corporations Act. Each one gets a Registered Liquidator Number, and their name and number appear on ASIC's Register of Liquidators. To be registered, a committee must decide the person meets the criteria, and the person must show ASIC they hold professional indemnity and fidelity insurance. Registration lasts 3 years.
The administrator must also be independent of the company and its directors. Before accepting an appointment, a registered liquidator must make reasonable inquiries to check there are no real or perceived threats to their independence. ASIC's guide on independence explains what creditors can look for.
How to check someone is a registered liquidator
ASIC's professional registers search lets anyone check whether a person is a registered liquidator. You need a name or registration number, and most information is free. ASIC points out that while it assesses people before registering them, it cannot guarantee the quality of their services.
When it is worth getting professional help
ASIC says directors should talk to a registered liquidator, a qualified specialist insolvency accountant or lawyer, or a financial advice service as soon as they suspect the company cannot pay its debts when due. A registered liquidator can review the company's solvency and explain the options, including voluntary administration, liquidation and small business restructuring.
Creditors and employees of a company already in administration can read ASIC's guide for creditors, and they can ask the administrator for information about the administration.
FIZO lists insolvency professionals and shows whether they appear on ASIC's register. You can find a registered liquidator on FIZO.