Appointing a voluntary administrator only requires a resolution of a director in the case of a sole director company or directors where a company is insolvent or likely to become so. Secured creditors can, in certain circumstances, also make the appointment.
The objective is to maximise the chances that the company or its business continue in existence and to provide creditors and members with a better return than would be achieved under an immediate winding-up or liquidation.
The voluntary administrator works with directors, management and other interest groups to try and formulate a plan for the reconstruction of the company. A Deed of Company Arrangement may be submitted for consideration and approval of creditors.
Control over the company’s assets, structure and business undertaking resides with the Voluntary Administrator. In cases of competing appointments – where a receiver and voluntary administrator are both acting – the latter will generally take charge of whatever is left when the receiver has finished. The receiver is appointed by a secured creditor and takes control of the asset which secures the debt.
Creditors cannot initiate winding-up proceedings during a voluntary administration as there is a moratorium in relation to the enforcement of debts and directors guarantees during the administration such action is.
If there is a secured creditor, it is important that it supports the concept and objectives of the voluntary administration and any deed of company administration. That way the secured creditor will not seek to take control by appointing a receiver. Unsecured creditors should also be kept informed and their support sought.
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