When a company enters voluntary administration, an administrator is appointed with powers similar to that of a liquidator, except the administrator is charged with exploring options to save the company. Normally a DOCA (Deed of Company Arrangement) is prepared and presented to the creditors to vote on. The terms vary widely and is usually a compromise or roadmap to allow the company time to continue to trade and repay creditors.
Benefit
The Administration period is usually between 30-40 days. It is a quick way to regain control of your business if a deed of arrangement is the desired outcome. You may be able to continue your business and your creditors can also agree to keep supplying your company.
Process
- Appointment of administrator
The appointment of an administrator is normally commenced by a company resolution of the board, although it can also be done by the Courts or a creditor. - Initial creditors meetings
A meeting of creditors is convened within 8 working days after appointment of the administrator. The purpose of this initial meeting is to confirm, or change, the administrator. - Ongoing administration
As the administrator comes to grips with the issues facing the company, they can continue to run the business as a going concern and assess the business to determine if a DOCA can be proposed. - Watershed creditors meeting
25 Days after the appointment of the administrator, the administrator presents to a second creditors meeting a proposal for the restructure of the company via a DOCA, or a recommendation for the liquidation of the company, or a recommendation that the company be handed back to the board. The creditors vote on the proposed resolution, including to approve a DOCA if one has been presented. - DOCA, Liquidation or return to board control
The result of the creditor watershed meeting will either be to accept the DOCA, vote the company into liquidation or to return the company back to the control of the board. If a DOCA is accepted, the board must agree to it and a deed administrator is appointed to manage compliance with the DOCA and the commitments made.
The terms of the DOCA are flexible and will suit the specific needs of the business and it’s creditors. The deed administrator can also reserve powers to maintain some oversight.
A resolution of a watershed meeting needs 75% in value of creditors representing over 50% by number of creditors to pass. Once a resolution DOCA passes it binds all creditors, even if they did not vote in favour.