What Is Administration?
Administration is when an independent party takes control of an organisation, investigates its operations, and then makes an assessment as to how they should proceed. Some examples of recommendations include:
- Selling the company
- Liquidating the company
- Initiating a company-wide restructuring
When you employ or are assigned an administrator, they receive a tremendous amount of power and possess extensive authority over your operations.
What Is Voluntary Administration?
A voluntary administration is launched by the organisation itself, with the board of directors meeting to appoint an administrator.
A company will usually enter administration in response to insolvency. They will look to see where they stand financially, and the actions needed to save them. If it is possible to ‘trade out’ of the difficulties, the voluntary administrator will steer the company through that process.
The Process of Voluntary Administration Looks Like This
The company selects an administrator – Board members and creditors will meet to assess their options and, if necessary, will choose to move forward with administration.
The administrator will begin investigating – The administrator , who assumes the powers of the company’s directors (which are suspended as a result of the administration), will review the company’s position on the property, business, affairs and financial circumstances to gain a perspective on the company’s position.
The administrator shares recommendations and appropriate strategies for the company to take – The administrator assesses the company, and the proposal put forward by the director(s) and must recommend whether or not creditors should accept the proposal. Once the administrator has reached their decision, they will prepare a report for the creditors of the company. The report will either outline the steps needed to get out of debt or, in the event it can’t be saved, the details of the impending ‘wind-up’.
Post Investigation, Voluntary Administration Has Three Options
- End the voluntary administration and return the company to the control of the directors;
- If the company is able to regain its momentum, to recommend and approve a deed of company arrangement (“DOCA”) to allow the company to pay all or part of its debts and maximize creditor returns, or
- Wind up the company and appoint a liquidator.
The courts and/or creditors also have the power to appoint an administrator, for example, a secured creditor holding security over most of the company’s assets may decide to appoint an external administrator to govern the company’s affairs.
Voluntary Administration Is a Specific Process
We offer free consultations with zero obligation. If you have more questions or would like any assistance, contact us for more information and to see if voluntary administration is the best outcome for all parties.
As a Trustee in Bankruptcy, Ross Thomson is often required to think outside the box. As well as creative thinking, Ross brings compassion to the table.
For Ross, it’s important to see the people behind the financial problem –not just numbers.
Ross recently helped a bankrupt client who lives in a retirement village with her seriously ill husband.
The unit she & her husband live in is not owned by them, but subject to a 20-year lease.
The money to be repaid by the management was due only at sale, when the client finally left the retirement village.
Sale of the unit was likely to take several years &, if he did sell the couple’s unit, Ross realised he would be effectively evicting them from their home, without resources or family to help them.
Ross decided to contact the retirement village management & put a proposal to them that they prepay some of the moneys they would otherwise pay the client.
The village management considered the proposal & have agreed to prepay some of the moneys otherwise due.
The client is relieved that she will not be evicted & can now concentrate on helping her husband through his health issues.
The moneys paid represented about 75% of what would have been available to creditors if they waited two years.
It is a win for the client and for the creditors.
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