The appointment of a voluntary administrator provides protection from creditors while the administrator puts forward a proposal (Deed of Company Administration or DOCA) for the restructuring of the company.
A voluntary administration would be suitable for a company that is trading profitably but has debts that make it insolvent. A proposal to introduce fresh funds or freeze some debts may therefore provide a better outcome for creditors than that resulting from its immediate liquidation.
The administration period lasts for approximately 30 days, by which time the administrator is required to convene a watershed meeting to determine the future of the company.
At the watershed meeting, the administrator provides a recommendation to creditors on whether:
i) the creditors should accept a deed of company arrangement (ie a proposal for debts to be repaid);
ii) the trading of the company is returned to the director; and
iii) the company should be placed into liquidation.
During the period of the administration the company and its guarantors are protected from creditors.
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