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Voluntary Administration
The aim of a voluntary administration regime is to preserve the business and, if that cannot happen, to increase the return to creditors than they would otherwise get from a liquidation.
This seeks to resolve the company’s future direction quickly, with an independent registered liquidator (the voluntary administrator) taking control of the company to investigate its affairs and formulate a plan for its future. Whilst the voluntary administration takes place, a moratorium is in effect, which prevents unsecured creditors enforcing their claims against the Company.
The process generally lasts between 25 and 30 business days, after which time the Company either enters into an arrangement with its creditors (commonly referred to as a deed of company arrangement (“DOCA”)) or is placed into liquidation.
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The voluntary administrator aims to save the business. If this is not a possible, then the company’s affairs are administered to obtain a better return to creditors than if the company had been placed straight into liquidation. A business might be saved, or better return may be achieved, through a DOCA which is generally proposed by the directors or other third parties, usually in consultation with the voluntary administrator.
Putting a company into voluntary administration requires the company’s directors to resolve that the company is insolvent, or likely to become insolvent, and that an administrator be appointed. The directors also need to obtain a registered liquidator’s written consent to act as a voluntary administrator before appointing an administrator.
Why choose voluntary administration?
A voluntary administration offers a collaborative approach to satisfying the company’s debts. It restrains creditors from enforcing their claims and can assist a company to trade out of short-term difficulties caused by cash-flow restrictions or one-off financial problems. When appropriate, it can also provide a way to restructure a business, or the company itself, to restore it to a healthier financial position.
How does a voluntary administration begin?
A voluntary administration begins when an appointment document is executed by either:
- The directors of a company after they have resolved that the company is, or is about to become, insolvent.
- A secured creditor after the terms of their finance agreement have been breached and the administrator consents to the appointment.
If you would like to learn more about the voluntary administration process and whether it is an option for you, please contact the team at MaC Insolvency for a free consultation.