When a company is under serious financial pressure, directors need to understand the available options before the position deteriorates further. Voluntary administration is a formal insolvency process designed to give an insolvent company, or as much as possible of its business, a chance to continue. If survival is not realistic, the process is intended to produce a better return for creditors and members than an immediate winding up. That reflects the statutory objects of Part 5.3A of the Corporations Act 2001 (Cth).
For Melbourne directors asking what voluntary administration in Australia involves, control of the company passes temporarily to an independent registered liquidator, called the voluntary administrator. The administrator investigates the company’s affairs, reports to creditors and gives an opinion on the company’s future. Creditors then decide whether the company should enter a deed of company arrangement (DOCA), return to the directors’ control, or be wound up. A voluntary administrator must be a registered liquidator.
Voluntary administration is governed principally by Part 5.3A of the Corporations Act. ASIC’s July 2026 Report 836 found that 44% of the administrations it reviewed entered a DOCA, particularly among larger and more complex appointments.
What Is Voluntary Administration?
Voluntary administration is a relatively short, intensive external administration process. Section 435A sets two objectives: maximise the chances of the company, or as much as possible of its business, continuing; or, if that is not possible, achieve a better return for creditors and members than an immediate winding up.
Once appointed, the voluntary administrator assumes control of the company’s business, property and affairs. The administrator investigates the financial position, considers restructuring proposals, compares likely outcomes with liquidation and reports to creditors.
Who can appoint a voluntary administrator?
The most common appointment is made by the company after the board resolves that, in the opinion of the directors voting for the resolution, the company is insolvent or is likely to become insolvent at some future time, and that an administrator should be appointed. This is the process under section 436A.
An administrator may also be appointed in certain circumstances by a liquidator or provisional liquidator under section 436B, or by a secured party entitled to enforce security over the whole, or substantially the whole, of the company’s property under section 436C.
The word “voluntary” can therefore be slightly misleading: in some circumstances an appointment can occur without the express agreement of the company’s directors.
How the Voluntary Administration Process Works
The process changes who controls the company almost immediately. The administrator has broad powers to manage the business and deal with its property. Directors remain in office, but their powers are suspended while the company is under administration.
Directors must assist the administrator by providing books and records and, ordinarily within five business days, a Report on Company Activities and Property (ROCAP) concerning the company’s business, property, affairs and financial circumstances. “Report as to Affairs” or RATA is the older terminology.
The moratorium: what happens to creditor claims
A major feature of voluntary administration is the moratorium on creditors. Court proceedings and enforcement processes against the company or its property are generally stayed unless the administrator consents or the court grants leave. Owners and lessors are also generally restricted from recovering property being used by the company.
The moratorium creates breathing space in which the administrator can assess the business and any restructuring proposal. It is not absolute. For example, a secured creditor with security over the whole or substantially the whole of the company’s property may retain enforcement rights if it acts within the statutory decision period.
There is also a temporary restriction on enforcing certain personal guarantees against a director, or a director’s spouse or relative, during the administration. That does not ordinarily extinguish the guarantee.
The role of the voluntary administrator
The voluntary administrator’s role is independent of the directors who made the appointment. The administrator investigates the company’s circumstances, assesses the alternatives and forms an opinion about whether creditors’ interests are best served by a DOCA, the administration ending, or the company being wound up.
In practice, this may involve preserving cash, deciding whether continued trading is justified, assessing a sale or DOCA proposal, investigating transactions and comparing creditor returns.
Creditors' Meetings: How Decisions Are Made
Two statutory creditors’ meetings usually occur during voluntary administration.
The first meeting of creditors
The first meeting must ordinarily be held within eight business days after the administration begins. Creditors can decide whether to replace the administrator and whether to appoint a representative body of creditors, called a “committee of inspection”, which acts as a sounding board to the administrator.
The second meeting: three possible outcomes
The second meeting is the critical decision point. It is usually held about five weeks after the appointment, or about six weeks where the Christmas or Easter timing rules apply, unless the court extends the convening period. It can also be adjourned within the statutory limit if creditors need more information or time.
Before the meeting, the administrator reports on the company’s position, the likely liquidation outcome, any DOCA proposal and the administrator’s recommendation.
Creditors then choose among three outcomes:
- the company executes a deed of company arrangement;
- the administration ends and control returns to the directors; or
- the company is wound up.
On a poll, resolutions are generally determined by a majority in number and value of creditors voting. If the number and value majorities split, casting-vote rules can apply.
Deed of Company Arrangement (DOCA): The Rescue Pathway
A deed of company arrangement is a binding compromise that sets out how the company’s affairs and creditor claims will be dealt with after creditors approve the proposal. It is flexible and can be adapted to the circumstances of the business.
A DOCA might involve a lump-sum contribution from directors, shareholders or another third party; a business or asset sale; ongoing trading with contributions from future profits; or a combination of these. Some deeds allow the company or business to continue. Others operate mainly as a mechanism for funding and distributing a compromise to creditors.
Commonly, related party creditors will subordinate their claims behind those of unrelated creditors, in order to improve returns to unrelated creditors and induce them to support the DOCA proposal.
ASIC Report 836 provides useful perspective. Across 3,528 grouped voluntary administration appointments commencing between 1 July 2021 and 30 June 2025, around 44% entered a DOCA. Of finalised DOCAs, 81% had wholly effectuated, while 17% had gone into creditors’ voluntary liquidation. Almost 90% of wholly effectuated DOCAs paid a dividend to unsecured creditors, with an average dividend of about 21 cents in the dollar and a median of 11.5 cents.
Those figures are not a promise of a particular return, or proof that a DOCA will always outperform liquidation. Outcomes depend on the company’s assets, creditor profile, funding and proposal structure. ASIC also found that DOCAs funded from future trading profits were more likely to fail than those supported by more certain funding.
Voluntary Administration vs Liquidation: Key Differences
The central difference in voluntary administration vs liquidation is purpose. Voluntary administration tests whether there is a better alternative to immediate winding up. Liquidation is directed to bringing the company’s affairs to an end, realising assets, investigating relevant conduct and distributing available funds according to statutory priorities.
Voluntary administration can be a pathway to survival, a business sale or an orderly compromise. Liquidation invariably leads to eventual deregistration of the company.
In both processes, directors lose the ability to control the company in the ordinary way. In voluntary administration that suspension may be temporary. In liquidation, the company is being wound up and the directors’ powers do not ordinarily resume.
For more detail, see our guide to the liquidation process and how long liquidation can take. Directors should also consider employee rights in liquidation and the potential consequences of personal guarantees after liquidation.
When Is Voluntary Administration the Right Option?
Voluntary administration is most likely to be worth considering where there is something to preserve: a viable underlying business, valuable contracts, goodwill, a sale opportunity, third-party funding, or a realistic DOCA that may give creditors a better outcome than liquidation. The moratorium can be particularly useful where immediate creditor action would otherwise destroy value.
But voluntary administration is not automatically the best answer merely because a company is insolvent. Cost and scale matter. ASIC Report 836 found median approved remuneration for a voluntary administration of about $68,000. For wholly effectuated DOCAs where both VA and DOCA remuneration were reported, the median combined cost was about $111,000. Those are historical medians across a wide range of appointments, not fee quotes, but they illustrate why the process can be uneconomic for a very small company.
ASIC also found that less than one-third of appointments with liabilities below $1 million resulted in an approved DOCA, and only about 15% of appointments with liabilities between $1 and $250,000 did so. That does not create a $250,000 threshold for using voluntary administration. It does reinforce the need to ask whether the expected benefit justifies the cost.
For eligible companies with total liabilities not exceeding $1 million, small business restructuring under Part 5.3B may be a more proportionate alternative because directors remain in control while a restructuring practitioner oversees the process. The $1 million eligibility limit is prescribed by the Corporations Regulations.
If insolvency is already apparent, delay can increase risk. Directors should obtain advice about business insolvency, director liability and the realistic alternatives before choosing a process.
If your Melbourne business is under financial pressure and you are unsure whether voluntary administration is the right path, contact IRT Advisory for a confidential assessment.
Frequently Asked Questions
What happens to employees during voluntary administration?
Employees are not automatically dismissed. If the administrator continues to employ staff, wages for work performed after the appointment are generally costs of the administration. Pre-appointment employee entitlements remain claims against the company and require appropriate treatment under any DOCA. If the company enters liquidation, employees have statutory priority for certain entitlements and may, subject to eligibility, have access to the Fair Entitlements Guarantee (FEG) scheme. The appointment of an administrator does not itself terminate employment.
Can directors be held personally liable during voluntary administration?
The appointment does not itself make directors personally liable for company debts, nor does it erase existing exposures. These can include insolvent trading claims relating to the pre-appointment period (only enforceable if the company is later wound up), director penalty liabilities and personal guarantees. Section 440J temporarily restricts enforcement of certain guarantees against directors and their spouses or relatives during the administration, but generally does not release the liability.
How long does voluntary administration take?
The second creditors’ meeting ordinarily occurs about five weeks after appointment, subject to holiday rules, court extensions and possible adjournment. Actual appointments can take longer: ASIC Report 836 found a median VA duration of 45 days and an average of 66 days. If creditors approve a DOCA, the deed administration may continue for months or longer; ASIC found a median of 248 days for finalised DOCAs in its review.
Is voluntary administration the same as liquidation?
No. Voluntary administration is a process for investigating and deciding the company’s future. It can end in a DOCA, a return of control to directors, or liquidation. Liquidation is the winding-up process itself.
How much does voluntary administration cost?
There is no standard fee. Cost depends on the size and complexity of the business, the quality of its records, continued trading, creditor issues, investigations and whether a DOCA is proposed. ASIC’s 2021-2025 data showed median approved remuneration of about $68,000 for a voluntary administration, but individual appointments can be materially lower or higher.
Talk to IRT Advisory About Voluntary Administration in Melbourne
Voluntary administration is a significant decision. Used in the right circumstances, it can preserve a viable business, facilitate a sale or provide the structure for a creditor compromise. Used where there is no realistic proposal, funding or value to preserve, it may simply add cost before liquidation, though in certain cases it may be used as a work-around process to liquidation where it is not possible to obtain the necessary shareholders’ special resolution needed to put a company directly into liquidation.
The right question is therefore not just “Can the company appoint an administrator?” but “What outcome are we realistically trying to achieve, and is voluntary administration the best process to achieve it?”
IRT Advisory assists Melbourne directors and business owners to assess voluntary administration and other restructuring and insolvency options before a decision is made. Learn more about our voluntary administration service or contact IRT Advisory for a confidential discussion.
