Voluntary Administration ("VA")

The following is the short form of what a "VA" is ... but importantly, every company is different and advice needs to be tailored to each company.

The Voluntary Administration process provides for the business, property and affairs of an insolvent company to be administered in a way that:

  • maximises the chances of the company continuing in existence, or
  • results in a better return for the company’s creditors than would result from an immediate winding up of the company.

An Administrator, can be appointed by:

  • the majority of the company’s Directors, or
  • a Liquidator of the company, or
  • a person holding a charge over the whole or substantially the whole of a company’s property.
An appointment by the company’s directors, can be quickly and easily made, for all they need do is pass a resolution that the company is insolvent or will likely become insolvent.

This process leads to 3 alternative courses of action are as follows:

  • that the company execute a Deed of Company Arrangement, or
  • that the Administration should end, or
  • that the company be wound up, in which case, the Administration converts to a Creditors Voluntary Liquidation.
The advantages of Voluntary Administration are:
  • Appointment can occur immediately,
  • prevents unsecured creditors, owners and lessors of property from taking action which may adversely affect the value of the business and assets,
  • creditors to consider a proposal may maximise the return to creditors,
  • enables directors in certain circumstances to avoid action that could be commensed by a liquidator other than for debts that have been personally guaranteed, and
  • can dispense with actions in a liquidation which are costly and time consuming
It should be noted that directors of companies that are insolvent or are likely to become insolvent should seek immediate professional advice in relation to their specific circumstances. The procedure normally requires consultation and certain investigative work before implementation, particularly when a secured creditor is in existence.
 

The above information is by necessity, general in nature and its brevity could lead to misunderstanding.
For further information, you are invited to contact Alan Topp.