What Is Voluntary Administration?
Voluntary administration is a formal insolvency process under Part 5.3A of the Corporations Act 2001 (Cth) that gives a financially distressed company the opportunity to restructure its affairs, or to achieve a better outcome for creditors than immediate liquidation.
When a company enters voluntary administration, an independent administrator takes control of the company’s affairs. The administrator investigates the company’s financial position and presents creditors with options: enter into a Deed of Company Arrangement (DOCA), return the company to its directors, or proceed to liquidation.
At Boss Lawyers in Brisbane, we regularly advise directors considering voluntary administration and creditors affected by it. This guide explains how the process works, what your rights are, and when voluntary administration is the right choice.
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Need voluntary administration advice? If your company is facing financial difficulty, voluntary administration can create a critical window to assess restructuring options and protect against creditor action. Our voluntary administration lawyers Brisbane guide directors and creditors through the entire process. Call Boss Lawyers on 1300 267 711.
general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
When Should a Director Consider Voluntary Administration?
A director should consider appointing a voluntary administrator when the company is insolvent or likely to become insolvent — meaning it cannot pay its debts as and when they fall due.
Common indicators that voluntary administration may be appropriate include:
- The company cannot pay its debts on time and creditors are demanding payment
- The ATO has issued a Director Penalty Notice for unpaid PAYG or superannuation
- A creditor has served a statutory demand and the company cannot pay within 21 days
- The company has viable business operations but is burdened by debt it cannot service
- A restructuring plan (via DOCA) could preserve the business and deliver a better return to creditors
The key advantage of voluntary administration over immediate liquidation is that it provides a moratorium on creditor claims while the administrator assesses whether the company — or its business — can be saved.
How to Appoint a Voluntary Administrator
Under section 436A of the Corporations Act, the directors of a company may resolve to appoint an administrator if they believe the company is insolvent or likely to become insolvent. The resolution must be in writing and passed by a majority of directors.
There are three ways a voluntary administrator can be appointed:
| Method | Who Appoints | Legislative Basis |
|---|---|---|
| Directors’ resolution | Directors (majority) | Section 436A |
| Secured creditor | Holder of a charge over substantially all of the company’s property | Section 436C |
| Liquidator/provisional liquidator | Existing liquidator who believes the company’s creditors would benefit | Section 436B |
The most common method is appointment by directors’ resolution under s 436A.
The Voluntary Administration Timeline
Voluntary administration follows a structured timeline established by the Corporations Act:
Day 1: Administrator Appointed
The administrator takes control of the company. Directors’ powers are suspended (though they remain in office). An automatic moratorium prevents most creditors from enforcing their claims against the company.
Within 5 Business Days: Notification
The administrator must notify ASIC, creditors and other relevant parties of the appointment.
Within 8 Business Days: First Meeting of Creditors
Creditors meet to consider whether to:
- Appoint a committee of creditors to work with the administrator
- Replace the administrator with one of their own choosing
Within 20–25 Business Days: Second Meeting of Creditors
The administrator presents a report with a recommendation. Creditors vote on one of three options:
- Enter into a Deed of Company Arrangement (DOCA) — a binding agreement between the company and its creditors
- Return the company to its directors — if the company is solvent and can continue trading
- Place the company into liquidation — if there is no viable restructuring proposal
The administrator may apply to the Court to extend these timeframes if more time is needed to investigate the company’s affairs or negotiate a DOCA.
The Moratorium: What It Means for Creditors
One of the most significant features of voluntary administration is the moratorium on creditor enforcement. Once an administrator is appointed:
- Unsecured creditors cannot commence or continue court proceedings against the company
- Secured creditors generally cannot enforce their security for the first 13 business days (the “decision period”) — after which they may enforce unless the administrator consents or the Court orders otherwise
- Landlords cannot terminate a lease or repossess property during the administration without Court approval
- Owners of property used by the company (e.g., under retention of title) may be affected if they do not have a registered PPSA security interest
The moratorium creates breathing room for the administrator to assess the company’s position — but it can be frustrating for creditors who are owed money and want to take action.
What Is a Deed of Company Arrangement (DOCA)?
A DOCA is a binding agreement between the company and its creditors that sets out how the company’s affairs will be dealt with. A DOCA typically involves:
- A moratorium on debts — creditors agree to accept a compromise (e.g., payment of a percentage of their claim)
- A fund to be established from which creditors are paid
- The company continuing to trade under the terms of the DOCA
- A deed administrator overseeing compliance
A DOCA must be approved by a majority in number and value of creditors voting at the second meeting. If approved, it binds all unsecured creditors, even those who voted against it.
Read more: Insolvency Lawyers Brisbane
Director Obligations During Voluntary Administration
When a company enters voluntary administration, the directors’ powers are largely suspended — but their obligations remain:
- Cooperate with the administrator: Directors must provide access to books and records, answer questions and assist the administrator (s 438B)
- Report on company affairs: Directors must deliver a Report as to Affairs (RATA) to the administrator within 5 business days of being notified (s 438B(2))
- Not deal with company property: Directors cannot dispose of or deal with company assets without the administrator’s consent
- Potential liability: If the administrator or liquidator discovers evidence of insolvent trading, breach of director duties, or uncommercial transactions, claims may be brought against the directors personally
Creditor Rights in Voluntary Administration
If you are a creditor of a company in voluntary administration, you have important rights:
- Vote at creditors’ meetings on the future of the company
- Appoint a committee of creditors to monitor the administration
- Replace the administrator if you believe they are not acting in creditors’ interests
- Oppose a DOCA if you believe it does not provide a fair return
- Apply to the Court to terminate a DOCA or set aside an unfair resolution
Creditors should submit their claims promptly and participate actively in the process to protect their interests.
Voluntary Administration vs Other Insolvency Options
| Feature | Voluntary Administration | Liquidation | Small Business Restructuring |
|---|---|---|---|
| Who is in control? | Administrator | Liquidator | Directors (with restructuring practitioner) |
| Can the company survive? | Yes, via DOCA | No — company is wound up | Yes, via restructuring plan |
| Moratorium on creditors? | Yes | Yes | Yes |
| Eligibility | Any company | Any company | Liabilities under $1 million |
| Director stays in control? | No | No | Yes |
| Typical duration | 25–30 business days (may be extended) | 6–24 months | 20 business days for plan |
The choice between these options depends on the company’s financial position, the nature and extent of its debts, whether the business is viable, and whether a restructuring proposal can deliver a better outcome for creditors.
Key Legislation
- Corporations Act 2001 (Cth) — Part 5.3A (Voluntary Administration), Part 5.3B (DOCA)
- Insolvency Practice Rules (Corporations) 2016 — procedural requirements
- Personal Property Securities Act 2009 (Cth) — security interests and priority
How Boss Lawyers Can Help
At Boss Lawyers, we provide strategic advice on voluntary administration for:
- Directors considering appointing an administrator — understanding your obligations and protecting your personal position
- Creditors affected by a voluntary administration — maximising your recovery and protecting your rights
- Parties considering a DOCA — negotiating terms, voting strategy, and enforcement
- Disputes arising from voluntary administrations — uncommercial transaction claims, insolvent trading claims, and challenges to DOCAs
Call Boss Lawyers on 1300 267 711 or contact us online to discuss your situation.
For strategic advice on director duties, personal liability, and shareholder disputes, speak with our experienced director dispute lawyers Brisbane. Call Boss Lawyers on 1300 267 711 or complete our online enquiry form today.
Further Reading
This is general information only and is not legal advice. You should obtain professional advice specific to your circumstances.
