Voluntary administration is typically commenced when the board of directors for a company considers that the company is distressed and requires specialist intervention to prevent the company falling into liquidation or receivership. An appointment as an administrator provides protection from creditors while it requires taking control of distressed companies, performing an evaluation of its overall situation and structuring an arrangement with relevant creditors to allow the company to continue to trade. This type of arrangement is referred to as a Deed of Company Arrangement (DOCA) and is typically proposed by an administrator and voted on at a meeting of creditors. A voluntary administration is suitable for a company that is trading profitably but has debts that make it insolvent. A proposal to introduce fresh funds or freeze some debts may provide a better outcome for creditors than that resulting from its immediate liquidation. The administration period lasts for approximately 30 days.
Voluntary Administration Creditors Meetings
There are two creditors meetings that are held in a voluntary administration. The first being the initial creditors meeting held within 8 working days of the administrator’s appointment. The second referred to as the Watershed Meeting, is held within 25 working days of the administrator’s appointment. The administrator is required to convene a watershed meeting to determine the future of the company. At the watershed meeting, the administrator provides a recommendation to creditors on whether:
– the creditors should accept a deed of company arrangement (ie a proposal for debts to be repaid);
– the trading of the company is returned to the director; and
– the company should be placed into liquidation.
Voluntary Administration
During the period of the administration the company and its guarantors are protected from creditors. The key skills required for a successful administration are stakeholder management and support, strategic leadership, management control and efficient financial analysis. If you are a director of a company and think voluntary administration may be a suitable resolution for you, please contact Principle Insolvency to discuss how we can help.