Voluntary Administrations/Deeds of Company Arrangements

The voluntary administration regime is designed to create an administration which maximises the chances of a business, or part of a business, continuing in operation, or results in creditors receiving a better return than would result from an immediate liquidation.

The voluntary administrator is usually appointed by simple majority resolution of the directors of the company.

Appointment of a voluntary administrator is, in the main, limited to companies which are insolvent or experiencing financial difficulty.

Following appointment, the voluntary administrator takes control of the company's operations and assets. During the period of voluntary administration which is generally about 28-35 days, with the assistance of the board and management the voluntary administrator usually continues to operate the company's business, conducts an investigation into the company's affairs, and works with the principals and their advisers in devising a strategy which will enable a better return to creditors and/or the continuation of the business. If directors decide for the business to continue and the administrator agrees, then it is put to creditors as a proposed Deed of Company Arrangement. In the absence of any proposed Deed, the company generally proceeds to liquidation. Whether the company continues is determined by a vote of creditors.

The advantages of voluntary administrations over other forms of external administrations are that:

a) an external administrator can be appointed immediately

b) the appointment provides a statutory moratorium on existing debts in that it prevents enforcement action by creditors (other than by certain secured creditors under specific circumstances) and the company cannot be wound up either voluntarily or by Court order during the period of voluntary administration unless the Court determines that a winding up is in the interest of creditors

c) control of the company's assets and activities immediately passes to an independent and qualified third party (the administrator, who generally would continue with existing management) for the period of the voluntary administration, usually 28-35 days.

d) owners or lessors of property used or owned by the company are precluded from recovering their property during the voluntary administration period, hence preserving the business intact.

e) there are few statutory limitations on what type of arrangement can be proposed as a Deed. A proposed Deed may envisage a compromise with creditors, an extension of the moratorium (time to pay), some combination of both or a completely different reconstruction

f) it is the creditors who ultimately determine the fate of the company. The voluntary administrator must form an opinion and make a recommendation to creditors as to whether the company should implement a Deed, be wound up, or the administration end. However, it is the creditors who vote on the resolutions and who, by ordinary resolution, determine the future of the company. The resolution of the majority binds all creditors.

The success to date of the voluntary administration regime is testament to the fact that it provides the fastest and most flexible form of external administration to facilitate the continuation of business and can provide solutions which are not possible or practical under other forms of external administration.

We are recognized as one of the industry leaders in voluntary administrations and deeds of company arrangement.

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