Every business goes through tough times—it’s just part of the journey. The turning point is when the right move is made at the right time. If you’re considering entering voluntary administration or are already on the path towards it, you’ve come to the right place. Our nimble team is ready to help you bring your business back on the front foot, offering a chance to pause and take a breath. This guide breaks down the steps to entering voluntary administration and explores the benefits and outcomes, including the possibility of a Deed of Company Arrangement (DOCA).
So, What is Voluntary Administration?
To know how to navigate voluntary administration in Australia, we must first understand what it is.
Voluntary administration is a lifeline for businesses struggling with financial pressures. It lets you hit the reset button, giving your business the opportunity to address financial issues and steer your company back on course without the immediate stress of creditor demands. Here’s what happens: Your appointed administrator takes a close look at your company’s financials and weighs all the possible ways forward. The end goal? Maximising the chances of your business continuing or providing a better result for the company’s creditors than immediate liquidation.
The Steps to Entering Voluntary Administration
Let’s explore the steps to entering voluntary administration.
Step 1: Appoint Your Administrator
The process begins when you, as a company’s director, decide to place your business into voluntary administration. This decision must be recorded through a formal resolution and documented in writing during a properly convened board meeting.
Following this decision, you appoint a voluntary administrator—usually a registered liquidator. Here, our role is to guide your company through its next phases and the restructuring process. A secured creditor holding a charge over most of the company’s assets can also initiate this appointment. With expert oversight, you’re giving your business a structured pathway to manage debts and recover business operations.
Step 2: Take a Breather
Once you appoint an administrator, you’ll have the breathing room to reorganise and strategise without the immediate pressure of your creditor’s actions. This moratorium period lets you hit pause on company debts and court proceedings. During this time, your company is legally protected from creditors’ claims, meaning unsecured creditors cannot pursue their claims without your administrator’s consent or a court order.
Step 3: Your Creditors Will Have Their First Meeting
The first creditor’s meeting is held within eight business days of your administrator’s appointment, with a notice of five business days. Here, your creditors can vote to replace your administrator (which is unlikely) or if they want to create a committee to oversee the administration process so they are updated with any progress.
Step 4: We Will Review Your Company’s Financial Affairs & Prepare a Report
We will thoroughly review your company’s financials and operations to evaluate all possible recovery or restructuring options. Then, we will prepare a detailed report for your creditors outlining your company’s financial health and possible routes forward. These might include returning control to you, entering a Deed of Company Arrangement (DOCA), or considering liquidation if necessary.
Step 5: Your Creditors Meet and Make a Decision
A second meeting is called within 25 or 30 business days from when you appointed us as your administrator; this also has a notice of five business days. Here, based on our report, your creditors vote to decide the next move, which could be returning control to directors, accepting a DOCA, or orderly liquidation.
We take this structured approach to ensure all your stakeholders are involved in the decision process, making it clear and manageable. Each phase is set up to give your company the best chance at effectively restructuring and potentially returning to a healthy financial state or wrapping up smoothly if recovery isn’t feasible.
Pivot Out of Difficult Times: The Benefits of Voluntary Administration for Businesses
There are several benefits of voluntary administration for businesses facing financial challenges. Let’s talk about it:
Take a Break: Protect Your Business from Creditors
The moment of pause with voluntary administration offers a shield against creditor actions, stopping most collection efforts, legal claims, and asset seizures. This protective measure gives you the space to restructure your business’s operations and financial commitments, letting us help you recover, optimise and reset.
Make Sure You’re Not Held Liable
When your company faces insolvency, it’s understandable if you’re concerned about being held personally liable for any debts. Voluntary administration reduces this risk, allowing you to avoid the possibility of bankruptcy. By entering into this process, you can leave the heavy lifting to us and take a much-needed step back from day-to-day directorial duties. We will take over these responsibilities, providing relief and space as we work together to strategically address your company’s financial stressors, maximising value and minimising risk.
An Opportunity for a Fresh Start with a DOCA
The next benefit of voluntary administration for businesses is the possibility of your creditors agreeing to a DOCA. This agreement lets us help your company resolve debts under feasible terms and potentially pave the way for a successful turnaround and return to profitability.
A DOCA is a formal agreement between your company and its creditors. It maps out how debts will be managed to keep your business running or provide a better return for creditors than an immediate winding up. It can include terms like partial debt forgiveness, extended repayment periods, or business restructuring plans that allow your company to operate while repaying its debts.
How to Navigate Voluntary Administration in Australia Effectively
Getting in Touch with Experts Early On
Give us a call at the first sign of financial distress—it can make a big difference. Our team sees beyond the facts and figures. We recognise the passion, ambition, and sleepless nights put into your business. We’re here to guide you with years of collective expertise and help you steer through the complexities of voluntary administration with clarity. When you make the right decision at the right time, we can plan for the best outcome.
Keep Communication Open and Honest
Maintaining transparent communication with your creditors, employees, and other stakeholders is crucial. By keeping them informed, we can manage expectations and look after key business relationships.
Plan for the Future
We’ll help you create realistic plans that aim for long-term business health. Backed by clear, innovative strategies, we can act with intelligence to gain creditor support, get your business back on track, and set it up to thrive.
The Next Chapter of a Voluntary Administration
Preparing for all possible outcomes is another thing to consider when considering how to navigate voluntary administration in Australia.
A successful voluntary administration could lead to a DOCA with your creditors. This lets us restructure debt and gives your business a chance to resume operations under new terms. It’s a positive outcome—helping preserve jobs, maintain key stakeholder relationships, and continue operations with renewed stability.
If turning the situation around isn’t possible, voluntary administration might conclude with liquidation. This means ceasing operations and selling assets to repay creditors. It’s a tough decision, but it ensures that debts are settled fairly and that all legal obligations are met. While it marks the end of business operations, it also provides a definite resolution for everyone involved and allows for a fresh start.
Working with experienced professionals helps you navigate the process smoothly, ensuring you’re well-prepared at every stage. Our agile team will guide you through the process, minimise disruptions, and aim for the best possible outcome.
Finding the Right Step for Your Business
Voluntary administration can be complex, but with the help of our key experts, it can be a transformative process—we’re on your side and in your corner. It’s all about taking the right steps, working with skilled professionals, and applying effective restructuring plans. This will have your business back on solid ground, setting the stage for future profitability.
If your company faces financial challenges, consider how voluntary administration might provide a structured path to recovery with Mackay Goodwin. There’s no time like the present to prepare for tomorrow.
FAQs
What are the first steps when considering voluntary administration?
Start by getting a clear picture of your finances. Review your financial statements and speak to an insolvency expert to understand the best steps forward. This will help you decide if voluntary administration is the right move for your business.
How quickly must a company act after deciding on voluntary administration?
After deciding on voluntary administration, you want to appoint a voluntary administrator as soon as possible. This is crucial to ensure legal protections that prevent creditor actions and safeguard your company’s assets.
Can I keep my business running during voluntary administration?
Yes, companies often continue to operate during voluntary administration. As your administrator, we will check if your business can keep trading under supervision. This helps stabilise finances and maintain business value.
What should we tell our employees during a voluntary administration?
Keep communication open with your employees. Let them know about the company’s status and how it might affect their roles. Transparent communication helps maintain trust and morale during these challenging times.