What is Voluntary Administration?
Voluntary Administration is an insolvency action where a company takes advantage of a moratorium period (a legal authorisation for debtors to postpone payment) by allowing an administrator to investigate the company’s financial position. It is designed to quickly and efficiently establish the best course of action for the financial future of a troubled company. A Voluntary Administration provides a flexible setting that enables a company time to attempt a compromise or arrangement with its creditors, which may save the company, the business and jobs while maximising the return to creditors.
When administration is voluntary, usually an administrator will be appointed by the directors of the company, but will be independent from the company itself. An administrator can also be appointed by a secured creditor, liquidator or provisional liquidator, although this is less common. The administrator must be sufficiently qualified to take full control of the company and ascertain the ideal resolution for all stakeholders. If it’s in the best interest of the creditors, the administrator may aim to restructure the company and try to keep it afloat; however, if it isn’t possible to save the company then the administrator will determine the best way to wind up the company in order to recompense creditors a greater amount than they would have otherwise received if the company had just been liquidated. The Administrator has 30 days to make a recommendation, but can apply for an extension if the company is large or complex in nature.
Voluntary Administration is often an advisable step for indebted companies to take, as it allows for an objective perspective on what the best possible outcome could be from an industry professional who is fully aware of all legislation and protocol. Entering into Voluntary Administration also places a ‘freeze’ on any impending legal action against the company or its directors and allows for a period of relief from the demands of creditors.
SM Solvency Accountants can advise you about your company’s solvency and whether or not Voluntary Administration is right for you. Call us now for a free initial consultation with no obligations whatsoever. You can find out more about the Voluntary Administration process by clicking here.