During the voluntary administration process, the administrator independently represents the company and is the liaison between the directors and creditors. An administrator is usually appointed by the company itself, although it may also arise from an appointment by a liquidator or a major secured creditor.
The directors’ powers are normally suspended during voluntary administration.
It is the administrator’s job to act impartially and ethically to investigate and report to creditors on the company’s business, property, affairs and financial circumstances. This is an important function because creditors rely on the administrator to advise them about the company’s financial position and whether or not a dividend (return of all or part of their debt) is likely.
Additionally, the administrator must determine the most effective and beneficial option for creditors out of the following three possibilities:
- Winding up the company and appointing a liquidator;
- Ending the voluntary administration and returning the company to the directors’ control; and
- Approving a deed of company arrangement through which the company will pay all or part of its debts and then be free of those debts.
To come to any of these conclusions for the benefit of creditors, the voluntary administrator must try to work out the best solution to the company’s problems, assess any proposals put forward by others for the company’s future and compare the possible outcomes of the proposals.
Upon commencement of the administration process, the administrators must call a meeting of creditors to be held within eight business days of appointment.
The administrator is then responsible for calling a second meeting of creditors to be held within 25 business days of appointment (this period can be extended by application to the court or with creditor approval in large or complex administrations). A vote as to which of the above three options for the company’s future takes place at the second meeting of creditors.