Insolvency is not necessarily the end of the road.
When a company experiences financial distress – whether from creditor pressure, poor cash flow, or internal disputes – directors often fear that insolvency is the end of the road. In reality, voluntary administration (VA) can provide a vital pause, giving companies breathing room to assess alternatives and find a better path forward.
At Jones Partners, we’ve seen voluntary administration provide the space needed to restructure, preserve value, and keep Australian businesses trading.
What is voluntary administration?
Voluntary administration is a formal insolvency process where an independent insolvency professional takes control of a financially distressed company. This will immediately halt most creditor actions, buying time to properly assess the business and its future. The administrator then investigates the company’s position and proposes the best outcome – whether that be entering into a Deed of Company Arrangement (DOCA), selling the business as a going concern, or winding up.
Key insights for accountants and lawyers
The key insights include:
Breathing space
VA gives companies protection from creditor action, creating time to explore solutions.
Independent assessment
An experienced administrator provides objective oversight and options for the future.
Better outcomes
VA often preserves more value for all stakeholders compared to immediate liquidation.
Not the end of the road
Many businesses emerge from VA stronger, with disputes resolved and operations stabilised.
Example
We recently assisted two directors of a raw material supply company who had reached a deadlock over strategy and leadership. Creditor pressure was mounting, and the directors feared insolvency would mean closure.
By appointing a voluntary administrator, creditor action was paused, and the company gained valuable breathing space. The administrator facilitated structured negotiations, resulting in a successful Deed of Company Arrangement, which brought the company back to solvency. The business avoided liquidation, preserved jobs, and continued trading.
This example shows how voluntary administration can transform a crisis into a reset – protecting the business whilst resolving internal disputes.
Steps to take
If you are advising clients facing financial distress:
- Explain that voluntary administration provides time to explore alternatives.
- Connect with an experienced insolvency professional who can independently determine if a VA best suits the unique circumstances.
- Encourage them to act early – options narrow as creditor pressure increases.
The takeaway
Financial distress doesn’t mean the end of a company. Voluntary administration provides breathing room, independent oversight, and the chance to reset. For directors and shareholders, it can be the difference between collapse and recovery.
We are here to help
If your client is under creditor pressure or struggling to resolve internal disputes, voluntary administration may provide the circuit breaker they need. Our team brings experience, independence, and practical solutions to help businesses find a path forward.
+61 2 9251 5222
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