This flexible and relatively inexpensive formal procedure provides a company with breathing space, so that a compromise or arrangement aimed at saving the company or the business and maximising the return to creditors can be attempted.
Voluntary Administration is an insolvency procedure where an external administrator called a ‘Voluntary Administrator’ is appointed by the directors of a financially troubled company, or by a secured creditor of the company holding a charge over most of the company’s assets.
Voluntary Administration provides a company with short term protection from its creditors while the future of the company is considered.
The Voluntary Administrator investigates the company’s affairs, reports to creditors, and makes a recommendation to creditors whether the company should enter into a Deed of Company Arrangement, go into liquidation or be returned to the directors.
A Voluntary Administrator is usually appointed by a company’s directors, after they have decided that the company is insolvent or likely to become insolvent. Less commonly, a Voluntary Administrator may be appointed by a Liquidator, Provisional Liquidator, or a secured creditor.