26/06/2009

A corporate customer owes me money and I have now found out that it has gone into voluntary administration. Where are the steps of the administration? Am I going to get some money?

An administrator may be appointed over a company by the company’s own directors.  One of the common reasons for an administrator to be appointed, is that the company is near insolvency, that is, it is unlikely to be able to continue to trade and pay its debts when due.  Putting the company into administration may limit the possibility of the directors being personally liable for insolvent trading.  The other general effect of administration is that claims against the company are suspended during the administration, unless the administrator consents.

A summary of the steps involved in the administration process are as follows:

Step 1 – Appointment of Administrator 

Once an administrator is appointed all directors’ powers are suspended and the administrator assumes control of the company and its affairs.  All claims against the company are also suspended during the administration, unless the administrator consents.

Step 2 – First creditors’ meeting 

Within 8 business days of appointment, the administrator must convene a creditors’ meeting by sending a notice to as many creditors as the administrator is aware of.  As the administrator has only had days to investigate the company’s position he or she will most likely not be able to form a view of the company’s financial position prior to the meeting.

Step 3 – Convening period 

After the first creditors meeting the administrator is to investigate the company’s financial position and provide a report to the creditors at their second meeting.

Step 4 – Second creditors’ meeting

Generally, within 20 business days of the appointment, an administrator must convene a second creditors’ meeting and present the report on the company’s business, property, affairs and financial circumstances together with a statement stating an opinion of whether it is in the creditors interests for the company to be wound up, the administration brought to an end and the company handed back to the directors or the creditors enter a Deed of Company Arrangement (DOCA).  In some circumstances the administrator may need more time to investigate the company and if so they will need need to apply to the Court for an extension.

If the creditors decide to:

1. end the administration – the control of the company is returned to the directors;
2. wind the company up – the administrator becomes the liquidator; or
3. accept a DOCA – the DOCA will set out the compromise agreed and the level of payment to be received by each creditor.

If you have any questions in regard to voluntary administration or debt recovery, please contact TOWNSENDS BUSINESS & CORPORATE LAWYERS on (02) 8296 6222.