The call or letter telling you that a commercial debtor has entered voluntary administration is never welcome. But the steps you take in the first few weeks after that news can meaningfully affect your outcome — or at least protect you from making it worse.
What voluntary administration means
Voluntary administration is a formal insolvency process under Part 5.3A of the Corporations Act 2001. An administrator is appointed — usually by the company's directors — to take control of the company, investigate its affairs and report to creditors on the best path forward. The options are a Deed of Company Arrangement (DOCA), liquidation, or the administrator recommending the company be returned to its directors (rare).
During administration, there is an automatic moratorium on most legal proceedings against the company, including recovery action. Calling to demand payment from the company will not work — the administrator controls the assets.
Attend the creditors' meetings
The administrator must call meetings of creditors. The first, within eight business days of appointment, is largely procedural. The second — typically within 20 business days — is where creditors vote on the company's future. Attend both if the amount owed is significant. You have a vote, and the creditors' committee at the second meeting has real influence over the outcome.
Lodge a proof of debt
To participate in any distribution or to vote at the creditors' meeting, you must lodge a formal proof of debt with the administrator. This is a simple form on which you state the amount owed and attach supporting documents — invoices, signed agreements, statement of account. Lodge it as soon as you receive it. Administrators are not obliged to chase creditors for claims.
Evaluate the DOCA on its merits
If the company proposes a DOCA, read it carefully before voting. A DOCA typically offers creditors cents in the dollar over a defined period in exchange for releasing the company from further liability. Compare the DOCA return to the likely liquidation return before deciding — sometimes the DOCA is better; sometimes liquidation recovers more.
Check for personal guarantees
The company's insolvency does not extinguish a properly executed personal guarantee given by a director. If you hold one, engage a solicitor to advise on enforcement — the administrator's moratorium does not typically extend to proceedings against guarantors personally.
The realistic expectation
Unsecured creditors in a voluntary administration frequently receive less than 20 cents in the dollar, and often nothing. The distribution priority under the Corporations Act places employees, secured creditors and the administrator's own costs ahead of unsecured trade creditors. This is not unique to administration — it is a structural feature of Australian insolvency law.
This article is general information only. Insolvency law is complex — obtain advice from a qualified insolvency practitioner or solicitor about your specific situation.
If you have a debtor in administration and are unsure how to protect your position, speak to Merion for guidance on the steps worth taking.