Voluntary Administration:

If a company struggles financially to the point that it approaches the brink of insolvency, meaning that becomes unable to pay its debts as they fall due, one of its creditors will be likely to commence the procedure for obtaining an order of the court for winding up the company so that a liquidator can be appointed to realise its property and make distributions to creditors. Normally the making of a winding up order means the death of a company's business and a cessation of its trading activities. However, in case that the company although insolvent or nearly insolvent, has the possibility of being rescued the scheme of voluntary administration is available. Having proper legal and financial advice from an experienced Bankruptcy and Insolvency professionals may greatly assist in explaining and advising in respect of this course of voluntary administration.  

Voluntary administration is a form of external administration which has a first stage of investigation called “administration” which may be followed by a second stage of administration under a deed of company arrangement. The main advantage of Voluntary Administration is that even if it is not possible for a company to continue in business, voluntary administration may result in a better return to creditors than would result from immediate winding up. In some cases that higher return could come from an improvement in the company's operations as the result of compromising and restructuring the company's liabilities. Comprehensive and sound advice from a Bankruptcy and Insolvency Lawyer regarding Voluntary can be greatly beneficial in this regard.

The process of Voluntary Administration is quite prescriptive and involves several stages. Firstly the company itself through its board of directors appoints an independent insolvency practitioner who is a registered liquidator to take control of the company, investigate its financial affairs and report to the creditors with a proposal as to its future. Then a first meeting of creditors is to be held within 5 business days of the administrator's appointment to give them an opportunity to reject the directors' choice of administrator and appoint someone else. After that there is a stay of proceedings so that the administrator can investigate without interference from impatient creditors. Then the court can restrain the exercise of rights by secured creditors as well as lessors of premises and owners of property, such as plant and equipment, used in the company's business provided they can be adequately protected in another way. Afterwards, a second meeting of creditors which the administrator has to convene, in general, within 21 days of his or her appointment to consider whether the company should  be administered under a deed of company arrangement in an attempt at rehabilitation; be wound up; or  in an unusual case, revert to normal operation under the control of those who controlled the company before the administrator was appointed. Then the administrator must send with the notice of the second meeting a report and a statement setting out with reasons the administrator's opinion on whether it would be in the interests of creditors for the company to adopt a particular option. The law surrounding voluntary administration is complex, varied and very detailed. Proper legal advice by a Bankruptcy and Insolvency Lawyer may be advantageous if you are acting in this capacity or are dealing with a Voluntary Administration.

If you would like further information or wish to discuss your voluntary administration matter with an experienced Bankruptcy and Insolvency Lawyer please do not hesitate to contact us by telephone on (02) 9233 4048 or by email to info@navado.com.au. 

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