If you’re reading this, you’re probably at a point where things have gotten serious. Creditors are pushing harder, cash flow is becoming a bigger problem, and someone has put voluntary administration on the table.
Voluntary administration might sound final, but it isn’t, and understanding what actually happens during the process tends to make it feel a lot less overwhelming.
This article walks through voluntary administration week by week: what triggers it, who the administrator is, what they do, and what the possible outcomes mean for you, your staff, and your business.
What is Voluntary Administration
Voluntary administration is a formal insolvency process under the Corporations Act 2001 that gives a financially distressed company a structured window to assess its options before a final decision is made about its future.
An independent administrator takes control of the company while protecting creditors’ interests, with the goal of achieving an outcome better than immediate liquidation.
What Triggers Voluntary Administration?
The situations that lead directors to consider voluntary administration tend to look similar: a creditor has issued a statutory demand, the ATO has sent director penalty notices, payroll has become a week-to-week exercise, or a key customer has collapsed, leaving a hole that can’t be filled.
Sometimes it’s more gradual, and there’s no clear path back to trading normally.
The decision to appoint an administrator is usually made by the directors of the company. It requires a resolution passed by a majority of directors that the company is insolvent or likely to become insolvent.
Voluntary administration can also be triggered by a secured creditor who holds a security interest over more than 50% of the company’s assets, or by a liquidator who believes VA would deliver a better outcome than continuing a liquidation. But in most small business situations, it’s the directors who initiate it.
Who is the Administrator?
The administrator is an independent, registered insolvency practitioner appointed to take control of the company for the duration of the process. Once appointed, the administrator assumes operational control of the business.
That’s the part that makes most directors uncomfortable, and it’s worth being direct about it. You are no longer running your business during voluntary administration. That said, the administrator’s job isn’t to shut your business down.
It’s to assess what the best outcome is for creditors, which often means keeping the business trading.
The administrator’s duty is to creditors, not to the directors. Their job is to investigate the company’s affairs, assess all available options, and report their findings honestly to creditors.
If the business is viable and a restructure is possible, the administrator will work toward that outcome. If it isn’t, they’ll say so.
Your role during this period is to cooperate fully, providing books, records, and information when requested, being honest about the company’s position, and working constructively with the administrator.
Cooperation is a legal obligation, but it’s also genuinely in your interest. An administrator who has complete information can do a better job of identifying options.
The Immediate Relief Most Directors Need
The moment an administrator is appointed, most unsecured creditors cannot commence or continue legal action against the company. Secured creditors generally cannot enforce their securities. Landlords cannot terminate leases.
The ATO can’t pursue recovery action. Personal guarantees given by directors are largely frozen, meaning creditors cannot act on them without court approval during the administration period.
For directors who have spent weeks or months fielding calls and managing demands, this moratorium provides some immediate relief. It doesn’t resolve the underlying problem, but it creates the space to work on it properly.
But there are limits. Certain secured creditors retain rights, and the moratorium doesn’t protect against all enforcement actions in all circumstances.
If personal guarantees are a significant concern in your situation, get specific advice on your position rather than assuming the moratorium covers everything.
The First Creditors’ Meeting (within 8 business days)
The first creditors’ meeting is held within 8 business days of the administrator being appointed.
The first meeting is largely procedural. Creditors have the opportunity to vote on whether to replace the administrator with someone of their choosing and to form a committee of inspection that liaises with the administrator throughout the process.
No big decisions are made in this first meeting. Creditors don’t vote on the company’s future, and the administrator doesn’t present findings or recommendations.
Directors are not typically required to attend the first creditors’ meeting, though the administrator may ask you to be available. Your administrator or adviser will tell you what to expect for your specific situation.
The Investigation Period (approx 20 business days)
After the first meeting, the administrator gets to work investigating the company’s financial affairs, assessing the viability of the business, and considering what options are available.
During this period, the administrator will review financial records, contracts, and assets.
They’ll assess potential claims against the company and look for any payments or transfers made before the administration that may be recoverable.
The business may continue to trade during this period if the administrator believes it’s in creditors’ interests. Whether trading continues depends on the nature of the business and its cash position.
If you want to propose a Deed of Company Arrangement, this is the period to work on it. Directors can put forward a DOCA proposal, and a good insolvency adviser will help you develop one that is credible and genuinely attractive to creditors.
The stronger the proposal, the better the chances of a successful outcome at the second meeting.
The Second Creditors’ Meeting (approx 25-30 business days)
At this meeting, the administrator presents their report and their recommendation on the way forward. Creditors then vote on one of three outcomes.
Return Control to Directors
This is the least common outcome. It means the administration ends and the directors resume control of the company.
It typically happens where the company’s financial position turns out to be better than initially thought, or where the underlying problems have been resolved during the administration period.
Approve a Deed of Company Arrangement
A DOCA is a formal agreement between the company and its creditors that allows the business to continue trading while repaying debts over an agreed period. The terms are negotiated and vary significantly depending on the company’s circumstances.
Creditors typically vote for a DOCA when it offers a better return than liquidation, which it often does. The business continues, jobs are preserved, and creditors recover more than they would from a wind-up.
Liquidation
If neither of the first two options is approved, or if the administrator recommends it, the company moves into liquidation. A liquidator takes control, assets are sold, and the proceeds are distributed to creditors according to statutory priority.
Creditors vote on whichever option gives them the best return. They’re not voting to punish anyone. Understanding that going in changes how the second meeting feels.
What Happens to Employees, Leases, and Contracts?
This is one of the things directors worry about most, and it’s worth covering directly:
- Employees remain employed during the administration period. Their wages and entitlements during the administration are treated as priority claims, meaning the administrator pays them ahead of most other creditors if the business is trading. If the company ultimately goes into liquidation, employees’ entitlements are prioritised in the distribution of assets, and the Fair Entitlements Guarantee may cover gaps in some cases.
- Leases are protected during the administration by the moratorium. The administrator will assess each lease and decide whether to keep it in place or terminate it, which may give rise to a landlord claim against the company.
- Contracts continue during administration unless the administrator terminates them. Where key supplier or customer relationships exist, the administrator will generally try to preserve them if doing so is in creditors’ interests.
How Long Does Voluntary Administration Take?
From the date the administrator is appointed, the process typically runs to the second creditors’ meeting within 25 to 30 business days, roughly five to six weeks.
That’s a short window, and it moves faster than most directors expect. The administrator has a compressed timeframe to investigate the company’s affairs and convene two creditor meetings.
If the situation is complex, the Court can extend the timeline, but this is the exception rather than the rule. The timeline limits uncertainty for creditors and for anyone doing business with the company during the administration.
It also means the process doesn’t drag on indefinitely while the business deteriorates.
From a practical standpoint, the weeks leading up to a voluntary administration often matter as much as the administration itself.
The earlier you seek advice, the more time there is to prepare a credible DOCA proposal, organise financial information, and give the administrator the best possible foundation to work from.
How Does Voluntary Administration Compare to Small Business Restructuring?
If your company has total liabilities under $1 million, Small Business Restructuring may be worth considering before voluntary administration.
The key difference is control. In SBR, directors remain in control of the business throughout the process, while in voluntary administration, control passes to the administrator.
SBR is a formal public process designed specifically for smaller businesses and tends to be less disruptive to day-to-day operations. The process for developing and voting on a restructuring plan is different, and the costs are generally lower.
That said, VA has advantages in situations where an independent administrator’s involvement is what gives creditors confidence, or where the complexity of the company’s affairs makes an independent investigation genuinely useful.
The Earlier You Move, The More Options You Have
Directors who wait until the situation is critical are still able to enter voluntary administration, but they’re working with fewer options and a weaker position.
The administrator has less to work with, creditors are more frustrated, and the prospect of a successful DOCA is reduced.
If voluntary administration is being discussed, a confidential conversation with our team is the right next step. We’ll give you a clear picture of where you actually stand and what your options are before any decisions are made.
Book a free confidential consultation with the Business Savers team.
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