The Voluntary Administration procedures were introduced in 1993 to provide an alternative to liquidation for companies that either are insolvent or are likely to become insolvent in the near future. The Voluntary Administration process allows an independent administrator to take control of the company to assess its viability and determine a plan for its future.
The Voluntary Administration has been structured to encourage companies, through the provision of a moratorium on creditors’ claims, with the necessary breathing space to restructure the company. The process was implemented as a quick, inexpensive and flexible means of undertaking this restructuring without the finality that the liquidation of a company brings.
In the alternative, should however the independent administrator see no benefit to creditors from the continued existence of the company, the Voluntary Administration process allows for a fast-track to liquidation.
With a greater number of directors now aware of the personal liability that insolvent trading brings, the Voluntary Administration process is a mechanism that provides directors with the means by which they can minimise this personal exposure. Directors are encouraged to seek professional advice as soon as they suspect that the company may be unable to pay its debts.
The process is commenced by a resolution of directors resolving the company is insolvent or likely to become insolvent. The appointment administrator takes control of the business and assets. The first creditors meeting occurs within 8 business days of appointment and at a second meeting resolves to either accept a commercial settlement creditors of proposed by the directors or liquidate the company.