What Happens on the appointment of an Administrator?

The administrator takes control

On appointment, control of the company and its property, business and affairs is vested in the administrator. The administrator is therefore responsible for the company’s affairs in the same way that the directors were prior to the administrator’s appointment.

Notice of the appointment must be published in the newspaper within three business days after appointment. Before the end of the next business day after appointment, notice must also be given to any holder of a charge or charges on the whole, or substantially the whole, of the company’s property: S 450A(3).

Where an administrator has been appointed by a secured creditor, the chargee must give written notice of the appointment to the company as soon as practicable but before the end of the next business day.

A moratorium is put in place

To give the company breathing space, as and from the commencement of the Voluntary Administration, a moratorium comes into effect preventing creditors from taking actions or proceedings against the company or its property during the administration without the administrator’s written consent or the Court’s leave.

Subject to the exceptions mentioned below, the moratorium also binds owners or lessors of property being used, occupied by or in the possession of the company. The administrator must not dispose of such property except:

  • with the written consent of the owner; or
  • in the ordinary course of the company’s business; or
  • with the leave of the court.

The moratorium also prevents a person enforcing a charge on property of the company during the Voluntary Administration except with the administrator’s written consent or the court’s leave: s440B.

Exceptions to the moratorium:

  • Creditors who hold a charge or charges on “the whole, or substantially the whole, of the property of a company” are in a special position – they are not bound by the moratorium if the charge is enforced in respect of all of the secured property, either before the commencement of the Voluntary Administration or within 13 business days of being notified of the administrator’s appointment.
  • A secured creditor holding a charge over the company’s property who has begun to enforce that charge prior to the commencement of the Voluntary Administration: s441B.
  • A secured creditor who holds a charge over “perishable property” or an owner or lessor of such property.
  • Owners or lessors of property used, occupied by or in the possession of the company who have enforced a right to take possession of the property prior to the administrator’s appointment.

Directors’ guarantees are unenforceable

A guarantee of a debt incurred by the company (usually given by a director or a relative of a director) cannot be enforced during the Voluntary Administration except with the Court’s leave. That protection ends if the company goes into liquidation and will usually end if a Deed of Company Arrangement is entered into.

Read more about Voluntary Administration by clicking here.

Need Low Cost Voluntary Administration? Call SM Solvency Accountants on 07 3832 68816