What Is Administration?
Administration is when an independent party takes control of an organisation, investigates its operations, and then assesses how it 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?
The organisation launched a voluntary administration, 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.
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