LAWS3089

1
External Administration (Ch5)

• Voluntary Administration

2
What is it?

• Voluntary administration is a term under Part
  5.3 of Corporations Act Administration of the
  companies affairs with a view to executing a deed
  of company arrangement
• The voluntary administration scheme is now the
  most common means of dealing with companies in
  financial difficulty.

3
What is it for?

• The objective of the voluntary administration
  scheme s 435A
• to maximise the chances of the company to
  continue in existence or if it is not possible
• to result in a better return for the company's
  creditors and members than would result from an
  immediate winding up of the company.

4
When?

• s 435C(1)
• Begins with the appointment of administrator
• Ends when normal outcome of administration
  achieved s 435C(2)
• a deed of company arrangement is executed
• creditors resolve that administration should end
• creditors resolve that the company be wound up
• Other reasons administration may end s 435C (3)

5
By Whom?

• Board of directors by a resolution s 436A
• - company is insolvent or likely to become
  insolvent
• - administrator should be appointed
• Liquidator or provisional liquidator s 436B
• Secured creditor who is entitled to enforce a
  charge over the whole or substantially the whole
  of the companys property s 436C

6
Who?

• Administrator must be a registered liquidator s
  448B and not related to the company ss 448C-448D
• not indebted more than 5,000 or a creditor in
  excess of 5,000
• not an auditor or partner/employee of an auditor
• not an officer of the company or
  partner/employer/employee of the officer of the
  company or partner/employee of employee of the
  officer
• not an officer of a company that is mortgagee
• The administrator must consent in writing and
  not withdraw at the time of appointment s 448A

7
What are administrators duty?

• s 438A
• To investigate
• To form an opinion on each of the following
  whether it would be in the interest of the
  creditors
• execute a deed of company agreement
• end the administration
• wind up the company

8
Distribution of Powers under Administration

• Powers of directors are suspended s 437C
• Powers given to administrator to take control of
  the business, property and affairs of the
  company
• control/carry on/manage/terminate or dispose of
  all or part of that business or property s 437A
• may perform any function or exercise any power
  that normal to the operation of the company not
  under administration s 437A
• remove or appoint a director s 442A
• execute a document, bring or defend proceedings
  or do anything in the companys name or its
  behalf s 442A

9
Protection from creditors

• Moratorium on creditors to ss 440A- 440G
• bring court actions s 440D
• winding up s 440A
• owner or lessor cannot recover property used by
  the company, s 440C
• charge unenforceable, s 440B
• Exceptions 1. substantial charges 2. secured
  creditors/ owners act before the administration
  begins and actions relating to perishable
  property ss 441A-441G
• claims of guarantee given by director or his
  relative, s 440J

10
Administrators liability

• As officers of the company
• Personal liability for debts incurred s 443A
• - services rendered
• - goods bought
• - property hired, leased, used or occupied
• Form the eighth day of administration, liability
  for payments to use of someone elses property
  under arrangements prior to administration ss
  443A-443B
• Administrators have a right of indemnity out of
  the company assets for all their debts s 443D,
  which has a priority over other debts ss
  443E-443F

11
What are the first steps by administrator?

• Within one business day
• notify the ASIC of the appointment, s 450A(1)(a)
• written notice of appointment to the company, s
  450A (2)
• written notice to holders of charges on whole or
  substantially whole of the companys property, s
  450A (3)
• Within three business days
• Advertise his appointment in daily newspaper
  which circulates in jurisdiction where the
  company has its office and carries on business, s
  450A (1)(b)
• Within five business days
• Convene a meeting of the creditors, s 436E

12
Purpose of first meeting of creditors

• Enable the creditors to determine
• whether or not a consultative committee of
  creditors should be appointed
• whether or not an administrator should be removed
  or replaced
• Might fix the remuneration of administrator by a
  resolution, s 449E (1)

13
How long?

• Until the second meeting of creditors, s 439A
• Convening period within 21 days of appointment
  (28 days, if Ester or Christmas intervene) plus
  within 5 business days after the end of convening
  period
• Court may extend convening period when
  application made within statutory convening
  period
• Meeting may be adjourned but no more than 60 days
  after the first day on which meeting was held

14
Second Meeting of Creditors Decision about the
Future

• Notice to creditors at least 5 days before the
  meeting s 439A
• Notice should include report about the company
  opinion on the three outcomes a details of the
  deed of company arrangement, if proposed
• Voting is by simple majority of those present if
  pool is demanded, resolution is by a majority of
  creditors voting where they also control more
  then half of the debt
• End of moratorium unless the deed of company
  arrangement provides for it
• End of Statutory phase and beginning of Contract
  phase of administration