When a company enters voluntary administration, an administrator is appointed with powers like 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 of DOCA’s can vary widely and is usually a compromise or roadmap to allow the company time to continue to trade and repay creditors over time.
Benefit
The administration period is usually between 30 – 40 days. We have found that it can be a 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 throughout the process.
Process
Appointment
The appointment of an administrator is normally by the board of a company, although it can also be done by the Courts or a creditor.
Initial creditor meeting
A meeting of creditors is held within eight working days after the appointment of the administrator. The purpose of the 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 meeting
25 days after the appointment of the administrator, the administrator holds a second meeting (the watershed meeting). At the watershed meeting, there will normally be three options:
1) the DOCA is approved by the creditors
2) the company is liquidated or,
3) control of the company is passed back to the board and the administration ends.
The administrators will provide their recommendation to the creditors prior to the meeting on what should be done. The creditors will then vote on the three possible outcomes.
For a resolution to pass at the watershed meeting it needs the support of 75% in value of creditors representing over 50% by number. If a resolution approving a DOCA passes it then binds all creditors, even if they did not vote in favour.