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Voluntary administration (VA) is a type of formal insolvency appointment that gives a company breathing space while its future is swiftly resolved. It allows companies to continue trading while undertaking a formal restructure and negotiating compromises with its creditors. It also stops unsecured creditors from enforcing their claims against the company.
What does voluntary administration involve?
As qualified ASIC / ARITA agents, we have the power to come into a business to act as voluntary administrators. The role of an administrator involves assessing a business’ viability moving forward and undertaking a range of other activities, including:
- Complying with statutory obligations (such as the ATO)
- Communicating with authorities and employees
- Engaging external experts to review internal controls
- Implementing measures to ensure its integrity
- Drawing up a deed of company arrangement (DOCA)
The voluntary administration period runs for 20-25 business days. At the end of this period, creditors can vote to either approve the DOCA so the company will pay all or part of its debts – and be free of its debts – or end the VA and return the company to the directors’ control. In some cases, voluntary administration may lead to liquidation.
What are the benefits of voluntary administration?
- Quick resolution of the company’s future
- Best chance a company has of restructuring its affairs to continue trading
- Creditors get a better return then they would if the company was placed immediately into liquidation